Bennett, Coleman and Co. Ltd (BCCL), the leading Indian media group, will acquire Religare Enterprises Ltd’s entire 44 per cent stake in life insurance joint venture Aegon Religare Life Insurance Co. Ltd, according to a stock market announcement on Tuesday. BCCL already holds 28 per cent stake in Aegon Religare.
BCCL, which has interests in print, television, radio and internet, has been shy of making large investment bets outside media. In the 1990s, the group had ventured into banking but merged the business with HDFC Bank in 2000.
Business Standard, quoting sources, reported that Religare Enterprises’ 44 per cent stake in life insurance JV could be valued at about Rs 1,000-1,200 crore, valuing the firm at around Rs 2,300-2,700 crore.
The JV's foreign partner Dutch company Aegon will also increase its stake from 26 per cent to 49 per cent in the JV, the announcement said, without sharing the details of the transaction. The government had recently hiked FDI limit in insurance to 49 per cent from 26 per cent.
An employee trust also owns 2 per cent in the JV.
If the transaction gets concluded, BCCL will become the major Indian partner in the business following in the footsteps of several other Indian groups such as Max India, Bharti Group and Sundaram which have tied up with global insurance biggies in their insurance businesses in India.
Following this transaction, Religare will completely exit insurance business. On September 25 last year, Religare had announced it would exit insurance business and was in search for a replacement shareholder.
The transaction is subject to approvals of Competition Commission of India (CCI), Foreign Investment Promotion Board (FIPB) and Insurance Regulatory and Development Authority (IRDA), the statement said.
Currently, there are 24 life insurance companies in India, which collected a total first-year premium of Rs 73,777.37 crore for the first nine months of the last fiscal year, according to IRDA, Among them, Aegon Religare, which started its operations in 2008, collected one of the lowest first-year premium of Rs 107.45 crore from life insurance.
The stake sale comes in the wake of recent media reports that the promoters of Religare Enterprises have planned to sell their stake in the financial services group. The promoters, Malvinder Singh and Shivinder Singh, own a 50.93 per cent stake in Religare Enterprises, the holding company for its financial services businesses such as alternative asset management, SME lending, capital markets and wealth management units, besides insurance.
On May 4, The Economic Times reported that companies such as Bain Capital, Baring Private Equity Asia and Multiples Private Equity could be among the potential bidders for Religare's assets.
The foreign partners could hike stake in insurance JVs as the cap in the sector was increased by Parliament in March. It passed the Insurance Laws (Amendment) Bill, 2015 which seeks to increase foreign investment in private sector companies to 49 per cent from 26 per cent, among other things.
Many foreign partners of both life an non-life insurance companies have announced raising their stake to 49 per cent. Some of them are seeking regulatory approvals.
Foreign partners of companies like Max Bupa and SBI General Insurance have already announced their intent to raise their stake in the joint venture.
Recently, the government approved French insurance firm AXA raising stake in its life insurance JV with Bharti Group to 49 per cent for Rs 858.6 crore.
The French firm has also been permitted to raise stake in the general insurance joint venture with Bharti. This will entail capital flow of Rs 431.40 crore.
Together, AXA's FDI in Bharti group will be worth Rs 1,290 crore.
More foreign partners are expected to raise their stakes in the Indian insurance business.
(With inputs from PTI)