DLF to sell its 74% stake in life insurance venture with Prudential to Dewan Housing

DLF Ltd, the largest real estate player by market capitalisation, has struck a deal to sell its 74 per cent stake in DLF Pramerica Life Insurance Company Ltd, to Dewan Housing Finance Corporation Ltd (DHFL) and its group entities for an undisclosed amount.

While Dewan Housing will pick 50 per cent, promoter group entities will buy the balance 24 per cent. The JV will be renamed DHFL  Pramerica Life Insurance Company Ltd.

Sources close to the development indicate that the transaction has been done at around Rs 190 crore ($32 million). A DLF spokesperson said, “The valuation is not correct and we do not comment on speculative figures.”

DLF Pramerica Life Insurance is a joint venture with Prudential International Insurance Holdings Ltd, which in turn, is a subsidiary of Prudential Financial, Inc, USA. According to the company, the book value of the business is Rs 236.8 crore.

As per DLF’s annual report, the joint venture recorded a loss of Rs 132.4 crore, as against Rs 128.3 crore in FY12.

On March 31, 2013, the joint venture completed about 4.5 years of operations, had five branches in India and a team of 5,487 individual agents. Also, it issued 1,02,418 insurance policies in FY13, as against 69,926 in the previous year.

Commenting on the development, Tim Feige, senior vice-president and international insurance group executive at PFI, said, “DHFL’s strong branch network across India and its deep knowledge of the retail financial services market will enable the business to enhance the products and services it provides to the existing customers and partners, further expand its distribution capabilities and strengthen its ability to meet the increasing protection needs of India’s growing consumer base in the years ahead.”

DLF ventured into unrelated business domains, including insurance and hospitality, a few years ago but a debt pile-up on its balance sheet has forced it to unwind from such businesses and focus on core real estate development. Analysts on the street see the transaction to exit insurance as nothing significant to move the stock. The biggest overhang for the stock has been DLF’s inability to raise cash from its Aman Resorts transaction, which missed its second deadline a few weeks ago. The firm, however, struck a deal to fully exit the wind power business.

There have been several deals in the life insurance sector as some existing promoters look to monetise their investments while new players look to enter the space. Deal activity may further pick up with the government recently hiking the FDI cap in insurance sector from 26 to 49 per cent.

Recently, Future Group agreed to sell 22.5 per cent stake in its life insurance joint venture with Italy’s Generali Group to Industrial Investment Trust Ltd. In another deal last year, Japan’s Mitsui Sumitomo Insurance picked up 26 per cent stake in Max Life Insurance for Rs 2,731 crore. Another Japanese firm, Nippon Life Insurance Company, picked up 26 per cent in Reliance Life Insurance for Rs 3,062 crore.

Earlier this year, Exide Industries Ltd, a manufacturer of automotive lead-acid batteries and provider of stored energy solutions, said it was acquiring the remaining 50 per cent stake in ING Vysya Life Insurance Company Ltd for around Rs 550 crore.

(Edited by Sanghamitra Mandal)

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