Bajaj Finserv on Tuesday announced that its insurance joint venture (JV) partner Allianz SE is considering exiting their life and general insurance businesses.
“Allianz has indicated to Bajaj that, given its strategic priorities, it is actively considering an exit from the life and general insurance joint ventures,” the company informed the exchanges.
Allianz holds a 26% stake each in insurance arms Bajaj Allianz Life Insurance and Bajaj Allianz General Insurance, while Bajaj Finserv owns 74%. Both are unlisted firms.
“Discussions are at a preliminary stage and there is no proposal before the board (Bajaj Finserv) of the company or its insurance subsidiaries in this regard,” the insurer said.
The Bajaj Finserv board is scheduled to meet on Wednesday to approve the second quarter results and these developments could come up for discussion at the board meeting.
Shares of Bajaj Finserv fell 2.02% on Tuesday to close at Rs 1,723 on the BSE.
Bloomberg had earlier reported that Allianz SE was in talks to scrap two Indian JVs with Bajaj Finserv in a dispute over the direction of the partnership and their inability to raise stakes in the JV at discounted prices.
The report said Allianz is instead looking to buy stakes in newly established insurance firms to retain a presence in the fast-growing Indian market. Bajaj has controlling stakes in the JV and has been running the company with control of management, strategic decisions, operations and business strategy with professionals from the insurance industry running the two JV companies.
In the past, Allianz had tried to raise its stake in the two Indian JVs with Bajaj from 26% to 49% after the cap on FDI in insurance was raised. Bajaj was not keen on diluting its stake and was looking to buy out the German company’s 26%. Bajaj Finserv and Allianz have at several times in the last 10 years held discussions regarding the stake purchases, but differences between them over the valuation and pricing could not be resolved.
Allianz has a 42% representation in the Bajaj Allianz Life Insurance business and 38% representation on the Bajaj General Insurance board with Renate Wagner, Ritu Arora and Sanjay Kishan Kaul as Allianz nominee directors. The Bajaj representatives are Sanjiv Bajaj, Niraj Bajaj, S Sreenivasan, and N Srinivasa Rao in the life insurance JV, while the general insurance company has all four and Nilesh Sathe on the board.
Bajaj said if Allianz exits the JV, the German company has committed full support to Bajaj in ensuring a smooth transition to the Bajaj brand, keeping in mind the interest of policyholders, business partners, employees and other stakeholders of the insurance companies.
The Allianz exit was not expected to impact Bajaj’s operations of the two insurance ventures and Bajaj was running day-to-day operations and developed its technology on the India stack to run operations independently.
Sanjiv Bajaj, chairman of Bajaj Finserv, has in the past spoken about the JV having to appoint a fair valuer as per RBI guidelines in case Bajaj were to hike its stake. As per the regulator, transactions have to be carried out at a fair value or the prevailing market value.
As per the shareholder agreement in 2001 between the partners, Allianz had the option of increasing its stake by executing the call option. Bajaj had preferred the transaction using the fair valuation method. The deal value was higher using the fair valuation method.