OTHERS

Murugappa group to foray into insurance through TI

CHENNAI, AUG. 30. The Murugappa group has chosen Tube Investments of India (TI) to be its vehicle to make a foray into general insurance even while deciding to use the network and brand equity of its finance arm Cholamandalam Investment and Finance Company (CIFCO) for product distribution.

Dropping its earlier moves to join hands with a foreign partner to enter insurance, the Murugappa group has now decided to go it alone with investments from group companies. The board of TI met today and formally approved a proposal to enter the general insurance business. TI, it may be recalled, had announced recently that it would beef up its stake in CIFCO by buying the holdings of group firms in the company.

According to Mr. M. Anandan, managing director of CIFCO, it is quite likely that Tube Investments will hold majority stake in the proposed insurance company. CIFCO will also invest in the venture. He, however, did not divulge CIFCO's likely equity stake in the proposed insurance venture. Non-banking finance companies (NBFCs) are allowed to invest a maximum of around 10 per cent of their net worth as equity in any insurance venture. Mr. Anandan admits that a joint venture partner can impart knowledge, experience and strength to the insurance business. But going forward with such alliance, in his reckoning, can give rise to lot of hurdles mid-way. Hence, the decision to go alone, he explains.

Though the move to enter insurance through TI has surprised some, Mr. Anandan sees nothing unusual in it. After all, he says, Tatas, Bajajs and the like have entered insurance not through their finance arms. ``TI is looking for growth opportunities. And, insurance is a good avenue,'' he says.

TI is expected to make a beeline for IRDA (Insurance Regulatory and Development Authority) with an application only after crossing procedural hurdles like getting shareholders' nod, amending articles of association and the like.