US partner to be largest MetLife shareholder

The US-headquartered Metropolitan Life Insurance will be the single largest shareholder in the domestic joint venture MetLife India, once foreign direct investment (FDI) cap is raised to 49 per cent.

With the Budget having proposed the hike in the FDI limit, the three Indian promoters will sell their respective shareholding in favour of the US company.

"Existing Indian promoters will give up about one-third of their holding in favour of US-based Metropolitan Life," said Venkatesh S Mysore, managing director, MetLife India Insurance Company.

This is based on the initial agreement that was signed by all the promoters before the company started, he added.

There will be no question of any single promoter exiting from the joint venture, said Mysore. "There will be no change in the management, strategy or branding. However, the scale of operations will grow faster," said Mysore, adding that the company is likely to revisit the targets.

The promoters have also agreed to pump in an additional Rs 50 crore capital by October 2004, taking the capital base to Rs 210 crore, from the prevailing Rs 160 crore.

Metropolitan Life will purchase 23 per cent additional shares from Indian promoters at a premium to be decided subject to valuation, as Indian promoters will reduce their respective holding by 31 per cent.

M Pallonji & Company, currently the largest stakeholder with 31 per cent, will give up one-third of its shares to Metropolitan Life, bringing down its stake to a little more than 20 per cent.

Similarly J&K Bank with its 25 per cent holding will in a similar manner reduce its stake to about 16.67 per cent. The balance 18 per cent, which is currently being held by three private equity investors, will also see their stake fall to about 12 per cent.

Meanwhile, MetLife India is ramping up its distribution network by tying up with an additional two to three regional banks "" two in the north and one in the south, said Mysore.

"We are talking to private banks and hope to procure Rs 3-5 crore premium monthly through bancassurance tie ups," he added.

MetLife India is also banking a lot on group sales and using corporate relationships of its US parent when it bids for accounts. It has bagged 23 group accounts, of which 18-19 are multinational companies, many of which are US-based.

Taking control

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• Three Indian promoters to sell their stakes to the MetLife

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• US promoter's stake to go up by 23 per cent

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• No promoter to exit the venture

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• Capital base to go up by Rs 50 crore from Rs 160 crore by October