ICICI Pru Life shares tumble nearly 9% to hit 52-week low; here is why

The slide in stock is being witnessed after UK-based Prudential plc on Sunday announced that it would acquire a majority 75% stake in Bharti Life Insurance for ₹3,500 crore from Bharti Life Ventures Pvt Ltd and 360 ONE Asset Management.

Currently, Prudential is a partner with ICICI Bank with around a 22% stake in the life insurance venture. With the announcement of a majority stake in Bharti Life Insurance, Prudential has to pare back its stake in the existing venture to comply with regulatory requirements.

This is the second exit from a long-standing foreign insurance venture partner, following Allianz's exit from Bajaj Finserve last year.

The transaction is for an initial cash consideration of ₹3,500 crore (about $389 million) payable on completion, Prudential Plc said in a statement.

Why is ICICI Pru sliding?

The life insurance stock is sliding in the trade because the market is worried that Prudential plc’s acquisition of a 75% stake in Bharti Life Insurance could eventually reduce its strategic focus on the ICICI Prudential Life joint venture.

The key concern is regulatory. After acquiring control of Bharti Life, Prudential may be required to cut its stake in ICICI Prudential Life to comply with Indian insurance ownership norms. As mentioned above, Prudential currently holds around 22% in ICICI Prudential Life and may need to bring it below 10%.

In simple terms, market participants are worried that Prudential’s “new favourite” in India could become Bharti Life instead of ICICI Prudential Life.

Even though there is no immediate operational impact on ICICI Prudential Life’s business, uncertainty over the ownership structure and future strategy is weighing on investor sentiment.