Bharti Enterprises on Friday announced its decision to sell its entire interest in its two joint ventures with AXA, both life and general insurance, to Reliance Industries Ltd. The sale is subject to necessary approvals from Irda, Competition Commission of India and any other relevant applicable authorities.
The decision is in line with Bharti?s strategy of focusing its energies and financial resources in businesses where it is making a deeper impact both in India and overseas. Currently, the financial services ventures do not fit into Bharti?s long-term growth plans. Bharti intends to use the proceeds from selling off its interests in these joint ventures towards other group businesses in India and abroad.
Bharti had entered into these joint ventures with the AXA Group in 2006 and held 74% stake in both these ventures ? Bharti AXA Life Insurance and Bharti AXA General
Insurance. Bharti is already in the process of offloading its stake in its JV with AXA for asset management.
On completion of the proposed transaction, RIL and its associate company Reliance Industrial Infrastructure (RIIL) would effectively own 57% and 17%, respectively, in both insurance companies and would become AXA?s joint ventures partners in India. AXA would retain its current 26% shareholding and would continue to manage the day-to-day operations of the JVs.
The proposed agreement contemplates an option by which AXA would acquire from RIL and RIIL upto 24% shareholding in both the insurance companies in accordance with the applicable regulations as and when the Foreign Direct Investment (FDI) regulations permit such holding by AXA. Upon exercise of such option, RIL will effectively own 45%, RIIL will effectively own 5% and AXA the balance 50% in both the insurance companies.
In fiscal year 2011, Bharti AXA Life collected premiums of Rs 790 crore and Bharti AXA GI collected gross direct premiums of Rs 550 crore.
In its annual report for 2010-11, chairman Mukesh Ambani had observed that ?The financial services sector is equally poised for rapid and significant growth. Several international companies have approached Reliance to be their partner of choice in establishing niche businesses in India. We will participate in this sector through partnerships with leading global companies.? In March this year, RIL announced a partnership with DE Shaw and a 50:50 joint venture has been formed. The venture will have a presence in areas such as institutional broking asset management and will operate through a Non Banking Finance Company.
The senior Ambani has forayed into the financial services space after the non-complete agreement with younger brother Anil Ambani was scrapped in May last year.