Indian financial services company Bajaj Finserv Ltd (Bajaj) is likely to buy out its German partner Allianz SE’s stakes in two of their insurance joint ventures (JVs) Bajaj Allianz Life Insurance Co Ltd and Bajaj Allianz General Insurance – in what could be the biggest buyout in India’s insurance sector, according to DealStreetAsia.
Citing undisclosed sources familiar with the matter, the deal is reported to be worth some 100 billion Indian rupees (US$1.47 billion). Bajaj currently owns 74% of the stake in both JVs, whereas Allianz SE holds the remaining 26%.
Following the increase in the foreign investment limit from 26% to 49% in March last year after the Indian parliament ratified the previously-stalled Insurance Laws (Amendment) Bill, 2015, it was reported that Allianz SE had been engaging in negotiations with Bajaj to increase its stakes in both insurance firms to the latest allowable cap limit.
The discussions, however, resulted in a fallout between the two parties, who could not reach a consensus on the share disposal price, after Bajaj chose not to honour a contract that allowed the German firm to buy more stake in the JVs at a price decided on when both parties first entered into the JV 15 years ago, reported The Economic Times.
The local business daily further reports that Bajaj is now lobbying with the Insurance Regulatory and Development Authority of India to block the future entry of Allianz SE, reasoning that it could undermine existing operations; the daily had cited people with knowledge of the development.
Allianz SE has also been exiting JVs elsewhere globally, having most recently disposed of its 50% stake in a life insurance JV with Hana Financial Group in South Korea.
Earlier in June, Max Life Insurance and Max Financial Services said they will merge into HDFC Standard Life Insurance, in what is touted as the biggest consolidation in India’s private insurance sector, thereby setting the scene for more M&As (mergers and acquisitions) in the insurance sector.