Private equity giant Warburg Pincus has agreed to acquire a 26% stake in IndiaFirst Life Insurance Co. Ltd from Legal & General Group Plc, helping the British financial services firm exit its almost nine-year-old investment.
Warburg will pay Rs 710.54 crore (£79 million or $105 million) for the stake, according to a press statement. The deal values Mumbai-headquartered IndiaFirst Life at Rs 2,733 crore.
The deal marks Warburg's first bet on an Indian life insurer and adds to its growing list of investments in the country. The PE firm has rapidly ramped up its India presence in the past couple of years, investing in companies such as ICICI Lombard General Insurance, Kalyan Jewellers India Ltd, multiplex chain PVR Ltd and logistics company Rivigo Services Pvt. Ltd.
The IndiaFirst transaction requires approval from the Insurance Regulatory and Development Authority of India (IRDAI) and other regulators.
IndiaFirst Life’s other shareholders are state-run Bank of Baroda and Andhra Bank. The two banks hold 44% and 30% of the insurer, respectively.
IndiaFirst Life said it recorded growth of 43% on individual annual premium equivalent basis in 2017-18, nearly double the growth rate of the overall industry. It also said that it has been profitable for the past four years. The company posted a net profit of Rs 51 crore in 2017-18.
Separately, Legal & General informed the London Stock Exchange it has refocused its insurance business in recent years on the UK and the US. “As a consequence we have disposed of a number of operations, including our businesses in the Netherlands, Ireland, France, Egypt and the Gulf. We are now following this strategy in relation to our stake in IndiaFirst Life,” Legal & General’s commercial director Simon Burke said.
IndiaFirst Life was incorporated in November 2009. The company sells life insurance plans, investment funds and group policies. Its product range covers protection (term insurance), savings, education and retirement.
The company had Rs 12,622 crore in assets under management for the year through March 2018. The company offers its products and services to over 50 million India customers in 1,000 cities and towns through a network of more than 8,000 branches.
Ambit Pvt. Ltd was the exclusive financial adviser for the transaction.
India’s crowded life insurance industry has 24 companies and the sector is dominated by state-run Life Insurance Corporation (LIC) of India. However, the market offers vast potential as insurance penetration remains low.
Deepak Parekh, chairman of mortgage lender HDFC Ltd, the parent of HDFC Standard Life Insurance Co., had said last year that India’s insurance penetration was about 3.4% compared with the global average of mid-20s. He had also said that there were too many insurance firms and not many could survive in a crowded market.
The high potential, along with the boom in India’s stock markets in the last 18 months, prompted many insurance firms, both life and non-life, to list their shares on the stock exchanges.
In December 2016, Singapore state investment firm Temasek Holdings and private equity giant KKR & Co each acquired a 1.95% stake in SBI Life Insurance Co. Ltd, India’s second-largest private sector, for Rs 1,794 crore ($265 million).
ICICI Prudential Life Insurance became the first life insurer in India to go public in October 2016.
As many as six insurance firms went public via the IPO route, leading the fundraise in what was a record year for India’s primary markets.
Max Financial Services Ltd approved a plan last month that would see the insurance firm raise funds from KKR Capital Markets India Pvt. Ltd, TPG Global LLC and Standard Chartered Bank.
The fundraising is to help unit Max Life Insurance Company Ltd pursue an acquisition opportunity, which was missed through the planned merger with HDFC Standard Life.