Aditya Birla Nuvo today said Rs 1,664 crore worth proceeds from 23 per cent stake sale in Birla Sun Life Insurance would substantially reduce its net debt and strengthen the balance sheet to support growth plans.
Canada's Sun Life Financial has proposed to hike its stake in the insurance joint venture Birla Sun Life Insurance (BLSI) to 49 per cent from 26 per cent at an investment of Rs 1,664 crore.
BLSI is majority-owned by Aditya Birla Nuvo Ltd (ABNL) and post deal, it would continue to hold the controlling stake in the joint venture at 51 per cent.
"Proceeds from the stake sale in BSLI will reduce the net debt of ABNL substantially. Coupled with the free cash flow generation from divisions, the standalone balance sheet of ABNL will stand strengthened to support its growth plans," ABNL said in a filing made to the stock exchanges.
The deal, subject to regulatory approvals, is expected to be completed by the end of 2015-16 fiscal.
According to the detailed Frequently Asked Questions (FAQs) about the deal, ABNL's endeavour is to create long term value for all the stakeholders by investing in the promising sectors.
"Besides, ABNL has identified promising investment opportunities in the Health Insurance, Payment Banks and Solar Power sectors which will need funding support equivalent to ABNL's 51 per cent stake, balance being funded by the respective joint venture partners," it said.
It further said that in the past few years, the company has made substantial investments in the NBFC business which has now become a large player and a valuable franchisee and recently started Housing Finance business.
"Both the businesses are growing at a good pace and require capital support. ABNL has capital commitment to the tune of Rs 600 crore for 2015-16 towards NBFC and Housing Finance businesses," it said in the FAQs.
On listing of BSLI in future, the FAQ said ABNL and Sun Life would like to hold maximum permissible ownership, that is, 51 per cent and 49 per cent.
"However, if in future the regulations require us to list BSLI, we will evaluate appropriate ownership structure at that point of time," it said.
