Axis Capital to Advise Shriram Cap on Buying HSBC’s Stake in Life JV

Shriram Capital, the holding company for the group’s ventures in financial services, has hired Axis Capital to advise it on purchase of HSBC’s stake in its lifeinsurance venture with Canara Bank and Oriental Bank of Commerce, said a person familiar with the development.
Shriram, which runs the nation’s biggest truck financing company and a successful retail lending business, plans to move up the ladder in the life insurance business where it has not made a mark since beginning operation in 2006.
The purchase of HSBC’s stake in Canara HSBC OBC Life Insurance Company and a subsequent merger of Shriram Life Insurance with it will propel Shriram to under 10 ranking, based on current financials, from 18, said the person, who did not want to be identified. Shriram declined to comment and Axis had not responded to a mail seeking comment.
The Chennai-based firm will be competing with Manulife, HDFC Life and ICICI Prudential to buy the 26% from HSBC that’s reducing its non-core businesses. Canara Bank is the largest shareholder with 51%, while Oriental Bank of Commerce owns 23%.
Shriram and Manulife stand a better chance of completing the transaction as they do not face obstacles, unlike ICICI, or HDFC Life. Insurance regulator mandates that no licence holder could operate two companies and if there is a owner with stakes in two, they should be merged.
Shriram Life’s new business premium income grew 7.27% to . 421 crore in 2012-13. Canara HSBC OBC Life Insurance reported a maiden profit of . 23.5 crore last financial year, on premium income of . 1,912 crore.
Bank-led insurers may find it complicated to strike the deal because of conflicting interests as Canara and Oriental may not be willing to give up on a business opportunity. For Shriram, the partnership with state-run banks could be a blessing. The Chennai-based insurer is willing to go more than half way to court the state-run banks whose 5,500 branches will by key to grow the business. A Shriram Group executive said that they are bidding for HSBC’s stake as they see value in the number of branches.

Source :The Economics Times.
Date : 15/05/2013
Writer : SHILPY SINHA MUMBAI

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