NBFC Sundaram Finance (SFL) on Wednesday said it has decided to buy out its 15-year-old partner UK-based RSA Group’s 26% stake in insurance joint venture Royal Sundaram Alliance Insurance Company for a consideration of R450 crore.
The decision follows RSA’s decision to exit non-crore business across the globe and Asia, in particular, to focus on its core business.
Sundaram Finance’s stake in the insurance joint venture will now increase to 75.90%. Eventually, along with its associates, it would hold 100% of the shareholding of Royal Sundaram, the company said in a statement.
Royal Sundaram, the first private sector non-life insurance company to be granted a licence in 2000, is a joint venture between SFL and RSA, with SFL and its associates holding 74% equity stake and RSA holding the balance 26%. Royal Sundaram is a leading player in the general insurance sector in India. The company reported GWP of R1,437 crore in FY14.
TT Srinivasaraghavan, managing director, Sundaram Finance, said: “RSA has been exiting its non-core business across the globe and, in the recent past, it exited from Singapore and Hong Kong, among other countries in the Asian region.” RSA has added a lot of value on the technical aspects of the business and been a valued business partner, he added.
To a specific question, he said: “RSA invested R120 crore over the years in the insurance joint venture and would be exiting with decent profits. We have no comments at this point of time beyond what we could announce today. The acquisition of RSA’s stake will be through internal accruals.”
According to company data, Royal Sundaram Alliance reported a lower net profit of R22.09 crore for the period ended September 30, 2014, against R59.90 crore in the same period last fiscal. The gross earned premium during the same period was higher at R770 crore compared to R728.50 crore in the same period last fiscal.