AXA raises stake in insurance JVs with Bharti to 49%

AXA becomes the first foreign partner to increase its stake in a domestic insurance company after the govt had approved up to 49% FDI in the insurance sector in March

The Foreign Investment Promotion Board (FIPB) has approved AXA Group's proposal to increase stake in its life and general insurance joint ventures with the Bharti group to 49 per cent. AXA's proposal to invest Rs 1,290 crore in Bharti AXA Life and General Insurance was one of the 19 foreign direct investment (FDI) proposals worth Rs 2,165 crore cleared by the government on Tuesday.

AXA becomes the first foreign partner to increase its stake in a domestic insurance company after the government had approved up to 49 per cent FDI in the insurance sector in March, compared to 24 per cent earlier.

Of the Rs 1,290 crore of FDI from AXA, Rs 858.60 crore will go to the life venture and Rs 431.40 crore to the general insurance venture. AXA, through AXA India Holdings (Mauritius), holds 22.22 per cent stake in the life and general insurance ventures as of now.

In statement issued in after the FDI cap in insurance was raised to 49 per cent in March, Bharti Enterprises Chairman Sunil Bharti Mittal said, "We can confirm AXA will step up its equity investment to 49 per cent. Bharti will soon move the application to FIPB, according to the new FDI guidelines."

Bharti AXA Life and General Insurance officials were not available for comment. The company might release an official statement on Wednesday, detailing the nature of the transaction.

Insurance consultants said the regulator might seek more clarity with respect to the life insurance venture, in which First American Securities holds 37.78 per cent stake, while Bharti Enterprises holds 40 per cent. First American Securities has been categorised as Indian-promoted; AXA India Holdings (Mauritius) has 10 per cent stake in it.

"The insurance Bill has made it clear that there will be Indian management control. However, in this case, there is some indirect shareholding. Some clarifications might be sought," said a senior consultant. On the general insurance and life insurance companies' boards, there were three foreigners, according to its latest public disclosures. Officials said as most board members were Indians, the composition didn't have to be changed. For the first nine months of FY15, Bharti AXA Life collected premiums of Rs 690.6 crore, compared with Rs 563.4 crore in the year-ago period. Its net loss fell from Rs 18.77 lakh to Rs 13.99 lakh.

In general insurance, losses rose to Rs 29.5 crore in the third quarter of FY15 from Rs 16.8 crore a year earlier. Total net premium collected for the first nine months stood at Rs 927.3 crore, against Rs 856.6 crore in the year-ago period. Other FDI proposals cleared by the FIPB on Tuesday included those of Mylan, Curatio Healthcare, Decathlon France and Mitsui and Co India Pvt Ltd. About 10 proposals were deferred, including those of BASF Chemicals, Sharekhan, O-zone Networks and Blue Dart. A total of 12 proposals were rejected.