SocGen ties up with Indiabulls for risk foray

Societe Generale (SocGen) will partner Indiabulls Financial Services in its insurance foray. Sogecap, the insurance arm of Societe Generale, signed an MoU with Indiabulls on Friday for creating a life insurance joint venture in which the French insurance major will have a 26 per cent stake.

The joint venture, Indiabulls Societe Generale Life Insurance Company has roped in former Chairman of LIC A K Shukla as its non-executive chairman.

"We hope to secure all approvals in three-and-half months and kick-off operations by May 2008," said Indiabulls CEO Gagan Banga.

The insurance joint venture will be initially capitalised with Rs 300 crore, of which Societe Generale (SocGen) will contribute Rs 150 crore for its 26 per cent stake.

More importanly, SocGen has undertaken to contribute 50 per cent of all capital infusions in the next three years. The joint venture will enhance its capital to Rs 2,000 crore in three years, said sources close to the deal.

Analysts say SocGen is paying a premium for the distribution reach of Indiabulls, whose 600 branches in over 200 cities will help the joint venture scale up its operations quickly.

Sogecap is present in over 10 countries and is the third largest insurance major in France. It is among the largest players in Eastern Europe and has a presence in many West Asian countries, Russia and now in China. Its experience in East Europe, which is largely a middle class market, can come handy in India.

Societe Generale is present in India through two ventures and is eyeing retail banking, subject to approvals. It has a 35 per cent stake in the SBI Mutual Fund. Last year, it bought Apeejay Finance, the Kolkata-based NBFC now called Family Credit.

"Their exposure to India and and experience of working with partners (SBI) will work in our favour. Plus, they have an experience in different geographies,'' said Banga. Indiabulls was earlier talking to ERGO Insurance Group, an arm of the Swiss reinsurance major Munich Re Group.

Interestingly, Indiabulls is the largest corporate agent for Max New York Life and is likely to collect a premium exceeding Rs 100 crore for the insurance entity in this fiscal.

This relationship will come to an end after the joint venture with SocGen takes off. The insurance joint venture plans to target premium income worth Rs 1,000 crore in the first year and Rs 5,000 crore of first year premium by 2010.

The insurance foray is significant for Indiabulls and the next logical step after consumer financing and stock broking. ''Insurance is a much larger business opportunity. ICICI Prudential enjoys a valuation of $10 billion. The largest players in the world are either into the financing or insurance business,'' said an expert.

Merrill-Lynch in a February 2007 report estimated that private players in India alone would have $45 billion in assets under management by 2010 from $15 billion today.

Indiabulls has received permission from the Reserve Bank of India for foraying into the insurance business and the joint venture got an in-principle approval from the insurance regulator Insurance Regulatory Development Authority (IRDA) on Friday. The IRDA approves new entrants in a three-stage process.