Globally known Ageas Insurance International N.V. will pick up 40% stake in Royal Sundaram General Insurance Co., a city-based company promoted by Sundaram Finance Ltd. of the TVS group.
Ageas will fork out ₹1,520 crore to acquire 40% equity stake in the insurance venture. Currently, Sundaram Finance holds 75.9% stake in Royal Sundaram. It proposes to divest 25.90% and retain 50%. Some of the existing Indian shareholders will hold the balance 10% post the deal in Royal Sundaram. Sources said Sundaram Finance would get ₹984 crore for the sale of 25.90% stake in the insurance venture.
An agreement to this effect was signed between Sundaram Finance, other Indian shareholders and Ageas here on Wednesday.
According to the annual report of Royal Sundaram, other shareholders include India Motor Parts & Accessories Limited, T V Sundram Iyengar & Sons Private Limited and Sundharams Private Limited.
The transaction, however, is subject to regulatory and other approvals. The deal is expected to close in the first quarter of 2019.
First private insurer
Royal Sundaram is the country’s first privately-owned general insurance company.
Ageas is a listed international insurance group with a heritage spanning 190 years. Among larger insurance firms in Europe, Ageas concentrates its activities in Europe and Asia. Ageas is already present in the Indian life insurance space through IDBI Federal Insurance Co. Ltd.
JM Financial Limited acted as the financial adviser and J. Sagar & Associates the legal adviser to Sundaram Finance and Royal Sundaram General Insurance.
Sundaram Finance, sources said, had preferred to go in for a strategic partner rather than align with a private equity player. This augurs very well for the insurance venture as one views the deal from a long-term perspective and also from the customer angle. The India experience of Ageas, sources said, proved a clincher for the deal in the end.
For the year ended March 2018, Royal Sundaram generated gross written premium (GWP) of ₹2,643 crore and reported a profit after tax of ₹83 crore. It registered an average annual growth rate of 19% and 56% in GWP and profit, respectively, between 2015 and 2018.
“Over the past 18 years, Royal Sundaram has built a sterling reputation in the market for its customer service excellence, notably in claims management. The company has demonstrated strong growth in its chosen segments and is witnessing a rapid growth in its profitability. For the next phase of growth, we are delighted to partner with Ageas, whose global experience will be an asset. Ageas is unique in its approach of working through local partnerships and joint ventures across Asia and we believe this can create significant value for Royal Sundaram,” said T.T. Srinivasaraghavan, MD, Sundaram Finance.
Bart De Smet, CEO, Ageas, said: “Partnering with Sundaram Finance, a well-established company with a vast knowledge of the Indian insurance market, offers us a great opportunity to benefit from the potential of what is one of the world’s largest economies with an insurance industry that is expected to grow significantly in the coming years. Being already present in the Indian Life Insurance Market, we now will be able to also fully grasp opportunities in the non-life market. We are confident that Ageas’s insurance expertise combined with Sundaram Finance’s market knowledge and position will take Royal Sundaram to a next level in terms of size and profitability.”
Royal Sundaram, a subsidiary of Sundaram Finance, is the first private sector general insurance company in India to be licensed in October 2000 by the Insurance Regulatory and Development Authority of India. The company was initially promoted as a joint venture between Sundaram Finance and Royal & SunAlliance Insurance plc, U.K. In July 2015, Sundaram Finance acquired the 26% equity holding from Royal & SunAlliance Insurance plc. Consequently, the entire 100% equity holding has been held by Sundaram Finance (75.90%) and other Indian shareholders (24.10%).
