Premjilnvest, the family office of Wipro Ltd’s Azim Premji, and private equity firm Warburg Pincus are buying Insurance Australia Group’s (IAG) 26% stake in SBI General Insurance Company Ltd.
PremjiInvest will buy a 16.01% stake in the insurer while Warburg will purchase 9.9%, SBI General’s parent, state-run State Bank of India, said in a stock-exchange filing.
In a separate statement, IAG said it is selling the stake for a total of A$640 million ($434 million, or about Rs 3,080 crore). It expects to record a profit after tax of A$300 million ($203.5 million).
IAG managing director and CEO Peter Harmer said the sale was part of the company’s strategy to sharpen its focus on its core territories of Australia and New Zealand.
The deal values SBI General, which was set up a decade ago, around Rs 12,000 crore ($1.6 billion). This is the same level at which State Bank of India had last year sold a 4% stake in the insurer to PremjiInvest and a PE fund managed by Axis Asset Management Company.
PremjiInvest owned a 2.35% stake and Axis New Opportunities AIF-I held 1.65% in the insurer at the end of March, according to SBI General’s annual report for 2018-19. State Bank of India owns 70%.
The latest transactions are likely to be completed by the end of June 2020, subject to regulatory approvals, IAG said.
SBI General has presence in more than 110 cities across India. It had a market share of 3.11% at the end of June, up from 2.7% last year, among general and standalone health insurers.
PremjiInvest’s biggest bet, Warburg’s return
The transaction is significant not just for IAG but also for SBI General and the two buyers.
The deal means SBI General will not be in a hurry now to float an initial public offering to let IAG exit. The insurer had started preparations for an IPO late last year. The general insurer would have followed SBI Life Insurance Co. Ltd in going public; the life insurer floated its IPO in 2017.
However, SBI chairman Rajnish Kumar said last month that the bank had dropped its plan to take its general insurance arm public as the unit didn’t need additional capital for now.
For PremjiInvest, the deal marks its single-biggest bet on a company, according to VCCircle estimates. The investment firm will shell out almost Rs 1,900 crore in this transaction. This will add to the Rs 283 crore that it is estimated to have spent last year for buying the 2.35% stake.
Before today’s transaction, PremjiInvest had signed its single-biggest cheque in June last year when it bought a 6% stake in Future Retail Ltd, the operator of BigBazaar hypermarkets, for Rs 1,672 crore ($250 million then).
For Warburg, the deal means it now has a presence—again—in India’s life and general insurance sectors. The PE firm had exited the general insurance segment just last month by selling its stake in ICICI Lombard General Insurance Co. Ltd. Warburg had acquired a 9% stake in ICICI Lombard in May 2017.
In the life insurance segment, Warburg had bought a 26% stake in IndiaFirst Life Insurance Co. Ltd last year.