MUMBAI (TIP): Dutch financial services group ING has exited its insurance business in India selling its 26% stake in ING Vysya Life Insurance to its joint venture partner Exide Industries in a deal that valued the company at Rs 1,100 crore. Exide is now looking for a foreign insurer who will buy the 26% stake. Although a minority shareholder, holding the maximum permissible 26% stake, ING group controlled the life insurance operations for over a decade even as Indian shareholding changed several hands. A statement issued from Amsterdam said that ING’s exit from the Indian life insurance joint venture is part of the previously announced intended divestment of ING’s Asian Insurance and Investment Management businesses.
“The process for the remaining businesses is ongoing. Any further announcements will be made if and when appropriate. Subject to regulatory approvals, the transaction is expected to close in the first half of 2013,” said the statement. The valuation of the deal has surprised industry insiders. “Prima facie a valuation of Rs 1,100 crore seems to be less considering that this is a 10-year old company where the promoters have invested more than Rs 1,000 crore,” said an industry official. Industry officials also feel that the coordinated exit of financial investors gives an impression that these were structured investments where returns are not entirely market linked. However, industry persons also point out that in an exit deal the Indian partner is on a strong footing as partners have the right of first refusal.
In a statement to the stock exchanges, Exide Industries said: “The company, currently owner of 50% of the equity capital of ING Vysya Life Insurance (IVL), has in-principle decided to acquire the remaining 50% of the equity capital of IVL (26% from ING group, 16.32% from the Hemendra Kothari group and 7.68% from the Enam group) for an aggregate consideration of Rs. 550 crore approximately, subject to regulatory approvals.” Hemendra Kothari and Enam had picked up stakes in the company as financial investors in recent years. ING is the third insurer to exit India after the opening up of the sector. Australian insurer AMP in a joint venture with Sanmar was the first to sell out to Reliance Life Insurance.
Some years later American insurer Chubb exited its joint venture with HDFC following disagreement with its partner who later tied up with Ergo. Last year US insurer New York Life sold its stake in Max New York Life to Max which later sold its stake to Japan’s Mitsui. Following the global financial crisis, several insurers have tempered their expansion plans. At present, North American insurer Manulife and Samsung Life of Canada are actively pursuing a presence in India. ING, which has a presence in banking, will continue to retain its presence. “Today’s agreement does not impact ING Vysya Bank, a publiclylisted Indian bank in which ING has a 44% stake, nor ING’s fund management business in the country,” the statement added.
Automotive battery manufacturer Exide is a Rajan Raheja group company and has a market capitalisation of over Rs 10,000 crore. The company got into the life insurance business by buying out GMR group. GMR group, which along with Vysya Bank, was the original partner of ING had acquired a majority stake after ING acquired controlling stake in Vysya Bank. Vysya Bank had gradually diluted stake in favour of GMR to avoid falling foul of regulation which did not permit foreign partners holding 26% to invest in their joint venture partners. Of the 24 life insurance players in the country, two companies— Life Insurance Corporation (LIC) and Sahara India Life Insurance Co—are running the business without foreign partners.