German partner reduces stake in Magma HDI insurance JV

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March 18, 2021 6:15 AM

HDI Global is part of the Talanx Group, a multi-brand conglomerate and the third-largest German insurance group by premium income.

Rajive Kumaraswami, MD and CEO of Magma HDI, said HDI had intended to increase its stake in the JV from 26% to 49% but the German company was not comfortable with the accompanying control and structure issues.Rajive Kumaraswami, MD and CEO of Magma HDI, said HDI had intended to increase its stake in the JV from 26% to 49% but the German company was not comfortable with the accompanying control and structure issues.

Capital infusion into Magma HDI General Insurance by Poonawalla Group company Cyza Chem, Morgan Stanley PE Asia and ICICI Ventures will result in the German partner reducing its stake in the Indian insurance joint venture to 17%. Magama HDI is a 26:74 JV between NBFC Magma Fincorp and HDI Global SE, Germany. HDI Global is part of the Talanx Group, a multi-brand conglomerate and the third-largest German insurance group by premium income.

According to RBI licence guidelines, being an NBFC Magma Fincorp had to reduce its holdings in the insurance company by 50% in five years and the German company, too, had wanted to up its stake in the Indian joint venture.

Rajive Kumaraswami, MD and CEO of Magma HDI, said HDI had intended to increase its stake in the JV from 26% to 49% but the German company was not comfortable with the accompanying control and structure issues.

So, while the government has permitted 74% FDI in insurance business, the German insurance company has chosen to reduce its stake in the JV because of the diminished role, despite being a company with 100 years’ experience and knowledge of the insurance business. According to Kumaraswami, HDI revisited its India strategy following the regulations regarding Indian ownership and after Indian control and basic rights of the shareholder was taken away. Magma HDI had got multiple extensions from the RBI to reduce the Magma Fincorp stake to 50%.

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