Exide strongly believes that insurance is an evolving business and that the company’s increased presence in the sector will add value to all stakeholders, says T V Ramanathan, Managing Director of Exide Industries.
In an interaction with The Hindu he said: “This is not the first time that we are entering the insurance business. We are already there. It is an evolving business, and a sunrise industry.” Exide had entered the insurance sector in July 2005 through an acquisition of a 50 per cent stake in ING Vysya Life Insurance Company. Mr Ramanathan said that the sector was good for people with deep pockets and ample patience as it had long gestation period. “The profits come later.. it is a long-term investment,” he said.
Indicating that the company’s strategy would be to tap the rural and semi-urban areas for business growth, he said: “Of late, with inclusive growth, a lot of income is getting transferred to rural areas, where the purchasing power of middle- and the lower middle income segment is increasing.”
“We believe that through continuous efforts, this buy-out will add value to the stakeholders in the medium and the long term,” he said. “Nobody goes bankrupt in the insurance business,” he added.
Internal accruals
On the funding of the Rs. 550-crore deal, Mr Ramanathan said that this should be possible through internal accruals. “Exide has been a debt-free company for two years, and it has free reserves of over Rs. 3000 crores besides, investments… the company’s mutual fund investments valued at around Rs. 700 crore should be sufficient to fund the deal,” he said.
Analysts, however, expressed scepticism on the buy-out, saying that although EIL had made a good transaction, it was an unrelated business which would need significant funds infusion till a new buyer was found. Exide had said on Wednesday that it would look for a new partner for its life insurance company.
Storage battery supplier Exide, which has plants in West Bengal, Maharashtra, Tamil Nadu and Haryana, ended the third quarter of 2012-13 with a flat bottom line, which showed a marginal drop at Rs. 104 crore, despite a growth in its top line.
