Exide steps up efforts to acquire INGs 26% stake in insurance JV
Raheja-led Exide Industries is intensifying efforts to buy out ING’s 26% stake in their insurance joint venture as the Dutch financial conglomerate is finding it difficult to find a buyer more than three years after beginning the search, two people familiar with the matter said.
The proposal has been gaining momentum in the last three weeks with Exide losing patience over the inordinate delay in ING finding a buyer as uncertainty dents growth and staff morale, those people said, preferring anonymity.
Investment bankers have been meeting up with the representatives of the Indian automotive battery maker with a mandate for a formal offer, but they have yet to propose a valuation.
But ING, which has said it was selling its Asian insurance and asset management businesses, is probably seeking a higher valuation than what Exide is offering, they said.
“These are market rumours that have been doing the rounds for some time,” said an Exide spokesman. “As a matter of policy , we don’t comment on market rumours.”
Even after nearly a decade of operations in India, ING Life India has less than 2% of the market share while the state-run Life Insurance Corp controls a third of the market. Furthermore, the government’s dithering on raising the foreign direct investment cap to 49% from 26% has prevented other global insurers from bidding for ING’s stake.
ING Life Insurance is a joint venture with Exide owning half of the company while ING owns 26%. The remainder is held by Vallabh Bhanshali-owned Enam Group and former Merrill Lynch Indian partner Hemendra Kothari.
ING Life’s growth has been slowing with its new business income falling 3% in FY12. In FY11, it grew a modest 2.6% while the industry grew 15%. The company sells policies in 229 cities across the country, with more than 35,000 agents.
As a strategy to pay back the government bailout it received during the financial crisis in 2008, ING is making an exit from its non-banking business such as insurance and asset management in Asia, including India.
It is splitting up its banking and insurance assets by the end of 2013 to comply with requirements attached to the bailout. Media reports suggest that bidders including Manulife Financial Corp are looking to buy operations in Singapore, Japan and Southeast Asia.
Change in ownership is not new for ING Life Insurance. The joint venture was established in 2001 between ING Vysya Bank and GMR Industries. Later in 2005, GMR Industries sold its entire stake to Exide. In 2010, Ambuja Cements sold its 11.5% stake to Kothari.
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