Japan’s Mitsui Sumitomo Insurance Group is looking to raise its stake to 49% from 26% in Cholamandalam MS General Insurance Company, a general insurance joint venture with Murugappa Group, people familiar with the matter said.
The Japanese company is following the example of other global insurers such as AXA, Tokio Marine and Bupa as it sees growth potential in India. “Mitsui is in advanced stages of discussion to increase stake in Cholamandalam General Insurance,“ said a senior executive close to the development. The government raised the cap on foreign direct investment in insurance sector in March this year.
In response to an email query from ET, the company spokesperson said, “As a matter of corporate policy we do not respond to such speculative pegs.“
While most foreign partners want to increase stake in their joint ventures in India, the deals mostly get stuck on valuation and control, experts said.
With foreign partners increasing their stake to 49%, the Indian promoters are left with 51%. If there is any further dilution of stake to public at the time of listing the company on the stock exchange, the control goes to the foreign partner.
Cholamandalam MS General Insurance Company had collected gross written premium of Rs 1,890 crore in 2014-15, marginally up from Rs 1,855 crore in the previous year. Profit after tax almost doubled to ` . 137 crore during the last financial year, from ` . 70 crore in 2013-14. The company operates through nearly 105branches and over 9,000 agents across the country.
According to the company’s annual report, its net worth was ` . 719 crore as on March 31, 2015. It had fixed assets of `. 61.7 crore and investment portfolio of `. 3,164 crore. The general insurance industry has grown about 9.3% over the previous year, after being hit by economic slowdown over the past couple of years that affected auto sales and the motor insurance business badly, for instance.
The industry is expected to grow 15% in the current fiscal, with increase in the motor third party premium, the likely improvement in fire and engineering portfolio, and the Pradhan Mantri Jan Dhan Yojana. Segments such as fire and engineering, marine and auto are poised to do well, with economic activity showing initial signs of pickup and stalled projects getting back on stream as well as new projects coming up.
Source: Economic Times
Source: Economic Times