Reliance Capital may have shelled out only up to Rs 100 crore (Rs 1 billion) for a direct entry into the life insurance business through the acquisition of AMP Sanmar, which has a readymade customer base and a cash reserve of Rs 80 crore (Rs 800 million), marking a low cost deal in favour of Anil Ambani.
According to industry sources, the deal by Reliance Capital's subsidiary Reliance Life Insurance company would be anywhere between Rs 90-100 crore (Rs 900 million-Rs 1 billion), contrary to reports that it could be in the range of Rs 200-400 crore (Rs 2-4 billion). Ambit Finance was mandated to handle the deal by sellers, sources said.
Reliance Cap pays Rs 400 cr for AMP Sanmar Insurance
Speed was the key: AMP Sanmar
Top executives of Reliance Capital on Tuesday reached Chennai, headquarters of AMP Sanmar, for chalking out an action plan to place the insurer on higher growth orbit.
AMP Sanmar, which has a capital base of Rs 217.5 crore (Rs 2.17 billion), had demonstrated the highest growth among all the players at over 170 per cent with a business of Rs 15 crore (Rs 150 million) in April-May this year despite uncertainties over the change in guard after its Australian partner AMP decided to quit Indian operations.
When contacted, Reliance Capital officials said with this acquisition there was no need for them to seek a fresh licence from Insurance Regulatory and Development Authority to enter the life insurance business although the acquisition has to be cleared by IRDA.
Sources said AMP Sanmar had cash balance of Rs 80 crore (Rs 800 million) according to books of accounts, but also has about 9,000 agents and about 900 employees besides 90 offices across the country.
Market analysts view that buying out AMP Sanmar, having over 5.0 per cent market share among a dozen private players, was a low cost affair as the average and marginal costs would have been on higher side had Reliance Capital decided to start a fresh venture.
Officials of ADA enterprise group company, however, did not hazard a guess as to how long it would take for them to turn the corner, saying the gestation period in the business was quite long.
Birla Sun Life officials were recently reported as saying that the company would be the first private insurer to post profit during the current financial year.
The process of acquisition of AMP Sanmar, by buying out 26 per cent stake of Australian company AMP and 74 per cent of Indian partner Sanmar, would take about a month to complete.
The move by Reliance Capital comes after Exide Industries recently bought out GMR Group's 49.83 per cent stake in ING Vysya Life for over Rs 200 crore (Rs 2 billion).
Many including Aviva, ICICI Prudential, HSBC and Birla Sunlife had evinced interest in picking up stake in AMP Sanmar.
