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The Bharti group’s stake valuation has gone up multiple times in both life and general insurance companies.
The group is divesting its stake to AXA group, which has already received Foreign Investment Promotion Board (FIPB) approval.
In the general insurance venture, when the issued capital was Rs 162.58 crore, the value of Bharti’s stake (77.78 per cent) was Rs 126.45 crore. With the general insurance venture now being valued at about Rs 1,611 crore, the value of its stake is Rs 1,253 crore, which is a jump of almost 10 times from the original value.
Similarly, in life insurance, valuation has increased by almost 21 times.
In the life insurance business, where Bharti has 40 per cent stake, there was paid-up capital of Rs 150 crore of which Bharti’s stake was Rs 60 crore. Now, with the venture being valued at Rs 3,206 crore, Bharti's stake would be valued at Rs 1,282.4 crore, which is 21 times more.
Sources said 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.
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 FIPB to increase its stake to 49 per cent in the life and general insurance venture. With this, Rs 1,290 crore of additional funds will come into the insurance ventures of which Rs 858.6 crore will go to life and Rs 431.4 crore will go into non-life.
As compared to regulatory requirement of 150 per cent, the solvency margin was 163 per cent for life insurance company and 158 per cent for general insurance, as on December 31, 2014. Both the insurance companies will need to beef up their solvency margins to support business growth.The group is divesting its stake to AXA group, which has already received Foreign Investment Promotion Board (FIPB) approval.
In the general insurance venture, when the issued capital was Rs 162.58 crore, the value of Bharti’s stake (77.78 per cent) was Rs 126.45 crore. With the general insurance venture now being valued at about Rs 1,611 crore, the value of its stake is Rs 1,253 crore, which is a jump of almost 10 times from the original value.
Similarly, in life insurance, valuation has increased by almost 21 times.
In the life insurance business, where Bharti has 40 per cent stake, there was paid-up capital of Rs 150 crore of which Bharti’s stake was Rs 60 crore. Now, with the venture being valued at Rs 3,206 crore, Bharti's stake would be valued at Rs 1,282.4 crore, which is 21 times more.
Sources said 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.
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 FIPB to increase its stake to 49 per cent in the life and general insurance venture. With this, Rs 1,290 crore of additional funds will come into the insurance ventures of which Rs 858.6 crore will go to life and Rs 431.4 crore will go into non-life.
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 per cent stake in the life and general insurance ventures, which it is expected to increase to 49 per cent. In the life insurance venture, where First American Securities holds 37.78 per cent stake, while Bharti Enterprises holds 40 per cent 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 per cent and will approach FIPB for approval. He had said that AXA will step up their equity investment to 49 per cent 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 per cent stake in both the ventures. While RIL decided to acquire 57 per cent, RIIL planned to buy the remaining 17 per cent 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.
