The Anil Ambani Group-promoted Reliance General Insurance is looking to buy a majority stake in its rival Royal Sundaram, while talks are in advanced stages to bring in Swiss Re as foreign partner in its life insurance venture.
While talks have reached advanced stages for sale of 10-15 per cent stake in Reliance Life to Swiss Re for an estimated Rs 1,500 crore (Rs 15 billion), a possible buyout of the Sundaram Group's 74 per cent stake in Royal Sundaram Alliance Insurance could take some time due to regulatory issues, sources in the know of the developments said.
Royal Sundaram Alliance Insurance Company is a joint venture between the Sundaram Group and the England-based RSA, which owns 26 per cent stake in the alliance. Though the deal size could not be ascertained, it can be noted that Royal Sundaram has mopped up Rs 820 crore (Rs 8.2 billion) premium in the first 11 months of this fiscal, compared to Rs 1,847 crore (Rs 18.47 billion) premium collected by Reliance General.
If successful, it would be the first time that a general insurance firm acquires a rival and therefore the relevant guidelines need to be sought from the sectoral regulator Irda.
In the life insurance space such a deal has happened in the past when Reliance Life acquired AMP Sanmar in 2005. Both Reliance Life and Reliance General are part of Reliance Capital, the Anil Dhirubhai Ambani Group's financial services arm.
With these two separate deals, Reliance Capital is seeking foreign alliances to run both its life as well as general insurance businesses, sources said.
When contacted, ADAG spokesperson declined to comment, while Royal Sundaram did not respond to an e-mail. RSA's external communications director Louise Shield said, "we don't comment on rumours and speculation so have no response to make." When contacted, Swiss Re's director for communications (Asia division) Kwokchoi Wong said the company "does not comment on market rumours".
As per the existing rules, a foreign entity can hold only up to 26 per cent stake in an insurance firm in the country. Besides plans to offload 10-15 per cent stake to a foreign partner, Reliance Life could sell additional 10-15 per cent shares through an initial public offer, for which it is awaiting final IPO guidelines from Irda, expected by the end of the next month.
For nearly a year, Reliance Capital has been planning either an IPO or strategic sale of its life insurance business to unlock value for shareholders. After the strategic stake sale to foreign firms, as and when it happens, Reliance Life could also come out with an IPO, according to sources.
"Depending on the interest from foreign firms (for buying a maximum of 26 per cent stake), the company (Reliance Life) could come out with an IPO," a source said.
