Under the SPA, 23 per cent of the stake would be sold to Ageas and 4 per cent to Federal Bank, said the private sector lender.
The transaction would be concluded subject to regulatory approvals, IDBI Bank said.
Currently, LIC-promoted IDBI Bank holds 48 per cent in IFLIC, while Federal Bank and Ageas hold 26 per cent each.
"IDBI Bank is expected to receive up to Rs 595.30 crore from sale of up to 27 per cent stake in IFLIC,," said the lender.
The bank will receive Rs 507.10 crore by selling 23 per cent stake to Ageas, and Rs 88.19 crore by selling 4 per cent to Federal Bank, IDBI Bank added.
In a separate filing, Federal Bank said it will purchase up to 4 per cent stake in IDBI Federal Life Insurance Co Ltd from IDBI Bank at a price not exceeding Rs 27.56 per equity share.
"The bank currently holds 26 per cent stake in IFLIC, making it an associate of the bank. Post-purchase, the total stake will increase up to 30 per cent," Federal Bank said.
IDBI Bank said the transaction is expected to be completed by December 31 this year, subject to regulatory approvals and satisfaction of the terms and conditions set out in SPA.
Ageas Insurance International NV is one of Europe's large insurance companies.
IFLIC's asset size stood at Rs 9,979.95 crore as on March 30, 2020, and the turnover was Rs 170.76 crore.
The transactions have been triggered primarily by life insurance behemoth LIC buying a majority stake in IDBI Bank last year, due to which the lender is reducing its stake in the venture.
Shares of IDBI Bank on Thursday closed at Rs 39.30 apiece on the BSE, up 0.90 per cent from the previous close, while the Federal Bank counter ended 0.19 per cent up at Rs 52.45.