MUMBAI: Switzerland-based Zurich Insurance Group will acquire a 51 per cent stake in Kotak Mahindra General Insurance Company for about Rs 4,051 crore through a combination of fresh capital infusion and share purchase. This will be the largest investment by a global strategic insurer in an Indian non-life insurance firm.
Kotak Mahindra Bank, Kotak General Insurance, and Zurich Insurance Company entered into definitive agreements for the transaction, the Indian lender said in a statement on Thursday. The deal is expected to be completed by June 30, 2024, it said.
The proposed transaction values Kotak General Insurance at about Rs 7,943 crore, or $955 million (at the INR-dollar rate of 83.19), on a post-money valuation, subject to customary closing adjustments.
Zurich Insurance intends to acquire an additional 19 per cent stake within three years of closing the deal, which will take its holding in the Indian general insurance firm to 70 per cent.
Once Zurich Insurance acquires the 51 per cent stake, Kotak General Insurance will cease to be a subsidiary of Kotak Mahindra Bank. At present, the bank holds 100 per cent stake in the general insurance firm.
Zurich Insurance will invest Rs 1,609 crore in the general insurer as fresh growth capital as part of the initial deal.
Kotak General Insurance’s gross written premium income rose to Rs 1,148 crore in 2022-23 from Rs 754 crore in 2021-22. Its asset under management (AUM) stood at Rs 1,744 crore at the end of March 2023, up from Rs 1,231 crore a year ago. And its net worth was Rs 341 crore for the year ended March 2023, up from Rs 233 crore for FY22. Its paid-up equity capital was Rs 680 crore at the end of March 2023, and it posted a loss of Rs 117 crore in FY23, according to the annual report for FY23.
According to data from the General Insurance Council, Kotak General Insurance’s gross direct premium income rose to Rs 284 crore in April-September 2023, a jump of 61 per cent from Rs 176 crore in the year-ago period. The company has a market share of 0.52 per cent in the country’s general insurance segment.
Zurich had been looking to enter the Indian insurance space for a while now. It had also held discussions with an Indian business group to jointly bid for Reliance Capital’s general insurance business, sources in the investment banking industry said.
The transaction between Kotak and Zurich is subject to customary conditions, including regulatory approvals from the Reserve Bank of India, the Insurance Regulatory and Development Authority of India, and the Competition Commission of India.
Dipak Gupta, MD and CEO, Kotak Mahindra Bank, said the combined expertise and resources of the respective firms would enable them to provide innovative solutions to meet the evolving needs of customers.
Kotak Mahindra Group’s pan-India phygital distribution presence and Zurich’s global capabilities in digital assets, and B2B and B2C formats have the potential to create a transformational ‘digical’ impact for the Kotak General Insurance franchise, he added.
Tulsi Naidu, CEO, Asia Pacific, Zurich Insurance Company, described India as one of the world’s most important markets with immense potential.
On the deal, Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services, said this was perhaps the first transaction with an international strategic player coming on board, after a slew of reform measures in the insurance sector and after the limit on foreign direct investment was increased to 74 per cent.
Morgan Stanley acted as financial advisors to Kotak Bank and Kotak General Insurance Company.
Source: Business Standard