The Bharti group which is in the process of divesting skate to the AXA group following the FIPB approval latter's investment proposal, has seen in its stake valuation going up multiple times, in both the life and general insurance companies since the time they were operational.
In the general insurance venture, when the issued capital was Rs 162.58 crore, the value of Bharti's stake (at 77.78%) was Rs 126.45 crore.
With the general insurance venture is now being valued at about Rs 1,611 crore, the value of its stake is at Rs 1,253 crore, which is a jump of almost 10 times since the original value. Similarly, in the life insurance, valuation has increased by almost 21 times.
In life insurance business, where Bharti has 40% stake, there was paid-up capital of Rs 150 crore of which Bharti stake was at Rs 60 crore. Now, with the venture being valued at Rs 3206 crore, Bharti's stake would be valued at Rs 1282.4 crore, which is more than 21 times growth.
Sources said that Bharti may look at divesting its stake to enable AXA hike its stake. An email sent to Bharti seeking their comments on these issues remained unanswered till the time of going to press.
The general insurance company got registered with IRDAI in June 2008, while for life it was registered in July 2006.
On Tuesday, AXA has got approval from Foreign Investment and Promotion Board (FIPB) to increase its stake to 49% in the life and general insurance venture. With this, Rs 1290 crore of additional funds will come into the insurance ventures of which Rs 858.60 crore will go to life and Rs 431.40 crore will go into non-life.
As compared to regulatory requirement of 150%, the solvency margin was 163% for life insurance company and 158% for general insurance, as on December 31, 2014. Both the insurance companies will need to beef up their solvency margins to support business growth.
Insurance sector consultants said that the additional funds infused by way of AXA hiking its stake and Indian promoters reducing their stakes would first go into the shareholder's capital. At a later stage, if it is required, the money will be infused into both the insurance companies.
At present, AXA via AXA India Holdings (Mauritius) has 22.22% stake in the life and general insurance ventures, which it is expected to increase to 49%. In the life insurance venture, where First American Securities holds 37.78% stake, while Bharti Enterprises holds 40% stake.
When the Insurance Bill was passed, Sunil Bharti Mittal, founder and chairman of Bharti Enterprises had announced that AXA will increase its stake to 49% and that they will approach FIPB for approval. He had said that AXA will step up their equity investment to 49% and that Bharti will soon move the application to FIPB as per the new FDI guidelines.
Bharti had earlier also planned to sell its stake in the life and general insurance business to Reliance Industries (RIL).
In June 2011, AXA and RIL said they had reached an understanding where the latter, along with its associate Reliance Industrial Infrastructure (RIIL), will acquire Bharti’s 74% stake in both the ventures. While RIL decided to acquire 57%, RIIL planned to buy the remaining 17% of Bharti's stake in the two insurance companies.
Later in November 2011, RIL said the deal was terminated as a result of the parties being unable to reach agreement on the long-term vision and joint governance of the ventures.
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