Future Group’s Kishore Biyani is set to raise about . 800 crore by unlocking value in two insurance joint ventures with Italy’s Generali Group. According to multiple sources, a formal announcement of the first transaction is expected as early as next week.
To begin with, the Future Group will announce a deal in the life insurance JV, where Mumbai-based non-banking finance company Industrial Investment Trust (IITL) is picking up a 22.5% stake for . 280-300 crore. IITL will also have the option of buying an additional 1.5% stake within the next one year.
Since 2007, the Biyani-promoted Future Group has had two partnerships with Generali — for life and general insurance. While the Future Group owns 74% in both, the Italian financial conglomerate owns 26% — the highest permissible limit under Indian laws. Of the 74%, Biyani’s flagship Pantaloon Retail owns 50% — either directly or via special purpose vehicles — while the promoter family owns the remaining 24%.
The Biyani family will continue to stay invested in the business till the government allows foreign insurers to increase their investments in local ventures to 49%.
The stake sale in Future Generali Life will cut Pantaloon Retail’s shareholding by half and help pare the flagship’s debt further. Deal to be Announced Next Week
Pantaloon Retail’s total debt stood at . 5,500 crore as on June 30, 2012, but Biyani has managed to cut it by half through a series of deals and restructuring initiatives across businesses. Future Generali Life has reported a 42% decline in new business premium income at . 147.28 crore during the April 2012-January 2013 period. The industry, hit by economic slowdown and regulatory changes, has seen a drop of 6% in income from sale of new policies. ET was the first to report these deals in October.
“The final JV and share-purchase agreements involving all three parties are due to be completed by this weekend, and a formal announcement is likely early next week. The binding agreements between IITL and Pantaloon have already been signed,” said an official directly involved in the negotiations. He sought anonymity since the talks are still in the private domain. Future Group CEO Kishore Biyani and IITL Promoter-Director Bipin Aggarwal refused to comment. Biyani is also hoping to conclude the partial divestment of his non-life insurance arm, this time with L&T as the buyer, by the end of this month.
In this transaction, Pantaloon Retail will divest its entire 50% shareholding while the Biyani family may hold on to its 24% stake till regulations change. Pantaloon is looking to raise . 500 crore through this sale.
The general insurance unit is the ninthlargest in the private sector and has seen 25.4% growth in premium income even as the industry grew 19.17%. For the firstnine months, the general insurance arm saw an income of . 832.43 crore. L&T General Insurance Company, founded two years ago, is a wholly owned subsidiary of L&T. The company saw its premium income grow 21.31% to . 117.49 crore during April-December. When contacted, L&T Finance Holdings CMD YM Deosthalee said, “As a matter of policy, we do not comment on speculation.”
The final binding agreement between L&T and Future Group is expected to be signed in the coming weeks. HSBC and Amarchand Mangaldas are the advisors to the transaction, said one of the sources mentioned above. Pantaloon Retail has pumped in a little over . 600 crore into the two insurance ventures. Biyani was initially looking to raise . 1,000 crore from his insurance companies after identifying them as non-core to his operations. Last year, he sold a majority stake in his financial services arm Future Capital to PE player Warburg Pincus.
Source : The Economics Times.
Date : 08/03/2013