HDFC’s Keki Mistry & L&T’s AM Naik held discussions, asked teams to take matter forward, say sources
HDFC has begun talks to purchase smaller rival L&T General Insurance, taking the first step towards potential consolidation in the country’s insurance industry. Two people aware of the matter said that Housing Development Finance Corporation vice chairman Keki Mistry and Larsen & Toubro chairman AM Naik have held discussions and asked their respective teams to take the matter forward.
“Preliminary work has started and it may take four months to close the deal,“ said one of the persons, who did not wish to be identified.
A deal, if concluded, will be the first move towards consolidation in the domestic insurance sector, which is dominated by three major companies jointly-owned by local lenders and overseas insurers. State-owned New India Assurance, United India, National India, ICICI Lombard and HDFC Ergo are among biggest players in the non-life insurance market. “As a matter of policy L&T does not comment on market speculation,“ L&T spokesperson said in an email response to ET’s queries on the buyout talks.
HDFC did not respond to a questionnaire. L&T General Insurance, owned by re. L&T General Insurance, owned by India’s largest engineering company L&T, has tried in the past to merge with smaller rivals to expand its network and attain scale and size. In 2013, L&T attempted to merge its general insurance subsidiary with Future Generali Insurance, but called off the plan due to differences over valuation.
The insurance sector is in a consolida tion phase, with foreign insurers stepping up their share in the Indian joint venture companies after the government last year gave the go-ahead to increase in foreign di rect investment limit to 49% from 26%. Several companies, including Bharti Axa Edelweiss Tokio Life, Aviva and Argon Re ligare have applied to the government to increase the stake of the foreign partner to 49%, while another 12 overseas life and in surance companies are in negotiations with local partners to boost their stake in the joint ventures.
L&T General Insurance Company, which started operations in 2010-11 and has about 15 branches across the country, earned gross written premium of `331 crore during 2014-15, focusing ma.inly on private motor and retail health insurance.
Source : The Economic Times (Mumbai)
Date : March 9, 2016