Belgium’s Ageas Insurance has agreed to buy a 40% stake in Royal Sundaram General Insurance Co. Ltd, expanding its presence in India.
Ageas will buy the stake from Sundaram Finance Ltd and other shareholders for Rs 1,520 crore ($210 million), according to a press statement.
Sundaram Finance holds a 75.90% stake in Royal Sundaram. It will divest a 25.90% stake and retain 50%. Some other existing Indian shareholders will hold the remaining 10% in the general insurance company.
The other shareholders in the insurance company include India Motor Parts & Accessories Ltd (9.9%), TV Sundram Iyengar & Sons Pvt. Ltd (6.8%), Sundharams Pvt. Ltd (3.3%), according to its annual report. The remaining stake is owned by individual shareholders such as S Ram, S Viji and R Ramanujam.
Ageas is already present in India through IDBI Federal Insurance Co Ltd; it holds a 26% stake in the life insurance company with IDBI Bank and Federal Bank owning the rest.
The Belgian insurer said the acquisition of a stake in Royal Sundaram fits its strategy of expanding in fast-growing markets in which it already operates, focussing on non-life insurance in particular.
The transaction is subject to approval of the Insurance Regulatory and Development Authority of India. It is expected to close in the first quarter of 20 19.
TT Srinivasaraghavan, managing director at Sundaram Finance, said Ageas’ global experience, including in several Asian countries, will help Royal Sundaram in its next phase of growth.
JM Financial Ltd acted as the exclusive financial adviser and J. Sagar & Associates acted as the legal adviser to Sundaram Finance and Royal Sundaram General Insurance.
Media reports in the past had said private equity firms True North, Multiples Alternate Asset Management, an investment arm of Goldman Sachs, Apax Partners and Carlyle Group were in the race to acquire a stake in Royal Sundaram.
The general insurance company is a subsidiary of Chennai-based Sundaram Finance. It offers motor, health, personal accident, home and travel insurance to individuals. It also has insurance products for fire, marine, engineering, liability, business interruption and other purposes, its website shows.
In July 2015, Sundaram Finance had acquired the entire 26% stake held by then-joint venture partner Royal and SunAlliance Insurance Plc. in Royal Sundaram General Insurance for Rs 450 crore ($72.25 million).
According to the Indian company’s annual report for 2017-18, the gross written premium of the general insurance industry during the year grew 17.4% to Rs 1,50,572 crore from Rs 1,28,213 crore the year before.
The market share of private-sector companies in the non-life insurance market rose to 48% in 2017-18. Royal Sundaram’s gross direct premium jumped nearly 20% to Rs 2,623 crore in 2017-18. Its market share marginally improved to 1.74% during the year. The company recorded a profit after tax of Rs 83 crore for 2017-18.
Deals in insurance sector
India’s foreign direct investment norms allow foreign insurers to acquire up to 49% stake in insurance ventures. This has enabled several foreign companies to pick up a stake in Indian insurance companies.
In June, Italian insurer Generali Group said it would increase its stake in two insurance joint ventures with the Kishore Biyani-led Future Group. Generali agreed to hike its shareholding from 25.5% to 49% in Future Generali India Life Insurance Co. Ltd and Future Generali India Insurance Co. Ltd.
Other recent deals in the general insurance segment include State Bank of India divesting a 4% stake in its general insurance arm to a private equity fund and the family office of Wipro Ltd chairman Azim Premji in September. The same month, Manipal Group entered the insurance sector by picking up a stake in Cigna TTK Health Insurance Co. Ltd.
In August, a consortium of private equity firms WestBridge Capital and Madison Capital and ace stock market investor Rakesh Jhunjhunwala agreed to acquire Star Health & Allied Insurance Company Ltd.