Indiabulls Financial Services Ltd has terminated its proposed 74:26 life insurance joint venture with Sogecap, the life insurance subsidiary of Societe Generale of France, according to its filing with the BSE.
The reason for the break-up is not clear yet but Indiabulls is now going ahead with its plans to foray into life insurance. Although it may start the business on its own, it could be looking at bringing in another foreign partner soon.
Both Indiabulls and Sogecap had entered into a JV agreement in April 2008 and Indiabulls had received the Reserve Bank of India’s (RBI) special dispensation to hold up to 74% in the JV. Others who had received such special approvals include RBI-regulated firms such as HDFC, ICICI Bank and State Bank of India.
Many other RBI-regulated financial entities had been allowed to hold only up to 50% stake in their insurance ventures which explains why many banks have three party insurance ventures.
Indiabulls Life Insurance, a wholly owned subsidiary of Indiabulls Financial, had recently received the R1 clearance (an in-principle approval allowing companies to submit their business plans) from insurance regulator IRDA and was expected to finalise the shareholding agreement with Sogecap. The final shareholding was to be frozen when it received the second in-principle approval (R2) from IRDA.
Initially, Indiabulls was to hold 49.5% in the venture with the individual promoters of Indiabulls owning another 24.5% with Sogecap holding the remaining 26%. But in September 2008, this proposed shareholding was changed where the 24.5% stake was to be owned by Indiabulls Securities, the brokerage arm of the group rather than the individual promoters. But IRDA was opposed to the idea of promoters owning the 24.5% stake and so it tweaked the structure. Thereafter, Indiabulls Financial had sought permission to hold the entire 74% stake on its own.