Chennai : UK-based insurer RSA Group has decided to exit India by selling its entire 26% stake in Royal Sundaram Alliance for Rs 450 crore, contrary to expectations that government’s decision of raising FDI ceiling in the sector would prompt foreign partners to raise stake.
The two companies ended their 15-year long partnership and with the RSA quiting the joint venture. Royal Sundaram Alliance Insurance Company will now be a 100 per cent subsidiary of Sundaram Finance and its associates.
Royal Sundaram Alliance was the first private general insurance company, which was granted licence in 2000 following opening up of the sector. It offers motor, health, personal accident, home and travel insurance for individuals and fire, marine, and liability policies for commercial clients.
“Sundaram Finance and RSA Group have reached an agreement whereby RSA has agreed to sell its entire 26 per cent equity stake in Royal Sundaram Alliance Insurance Company to Sundaram Finance for a consideration of Rs 450 crore, subject to all regulatory approvals,” a statement by Sundaram Finance said.
The decision of RSA Group to quit the joint venture comes barely two months after the President promulgating an Ordinance allowing foreign companies to hold up to 49 per cent stake in Indian insurers. Earlier, 26 per cent FDI was allowed in the insurance sector.
Commenting on the deal, Sundaram Finance MD T T Srinivasaraghavan said: “Sundaram Finance and RSA have enjoyed excellent relationship over the past 15 years and built up a successful and respected brand in insurance… While we are sorry to part company with them, we recognise that this is part of their larger global portfolio strategy.” The deal is expected to be completed in six months. RSA Group Chief Executive Stephen Hester said: “This transaction continues the excellent momentum of our disposal programme and represents further progress in tightening the strategic focus of the Group”.
Royal Sundaram is one of the leading general insurance companies in the country with a gross written premium of Rs 1,437 crore in 2013-14. The firm has over 6.7 million customers, 1,700 employees and its products are distributed in 180 cities throughout the country.