Kishore Biyani-promoted Future Group and construction and engineering company Larsen & Toubro Ltd have decided to call off talks to form a joint venture by merging their general insurance businesses, citing delay in the transaction and obtaining approvals, according to a stock market disclosure.
"The parties have decided mutually to call off the discussions around the proposed joint venture. L&T General Insurance will continue its focus on expanding its business footprint in the areas of both general and health insurance,” L&T said in a filing to the stock exchanges.
In March last year, L&T General Insurance, an arm of Larsen & Toubro, and Future Generali India Insurance Ltd – a joint venture between local retail chain operator Future Group and Italy's Generali SpA - had signed an agreement to merge the two firms.
Italy’s Generali holds 26 per cent stake in the venture, Future Group’s flagship retail firm Future Retail (formerly Pantaloon Retail) holds around 50 per cent stake, while the rest is with a promoter group entity called Sprint Advisory Services Pvt Ltd.
As per the non-binding agreement signed with L&T, Future Group agreed to merge its general insurance business with L&T General Insurance in a deal where the Kishore Biyani-led group also decided to sell part of its stake to L&T and the Italian partner. Post-merger, Generali was expected to own 26 per cent holding in the merged entity, L&T was to hold 51 per cent and Future Group was to retain 23 per cent.
The merger, which was first of its kind in general insurance business, was subject to due diligence from the both parties, apart from approvals from the insurance regulator and other bodies.
The financial details of the proposed deal were not disclosed by the companies at the time of signing the agreement, but media reports had said that the deal involves payment of around Rs 500 crore ($90 million) to Future Group by other partners in the tripartite venture. The proposed deal was part of Future Group’s efforts to exit or part-exit non-core businesses to reduce its debt.
L&T General Insurance, which operates through 17 branches across India, commenced its operations in 2010-11 and earned a gross written premium of Rs 253 crore during the financial year ended March 31, 2014, registering a growth of 39 per cent over the previous fiscal.
(Edited by Joby Puthuparampil Johnson)