[1/2] Uday Kotak, Managing Director of Kotak Mahindra Financial institution poses for an image on the firm’s company workplace in Mumbai January 15, 2015. REUTERS/Danish Siddiqui /FILE PHOTO
MUMBAI, June 14 (Reuters) – Zurich Insurance coverage Group (ZURN.S) is in talks to purchase as much as 51% of India’s Kotak Common Insurance coverage, two sources with direct data of the matter stated, a deal that might mark its first main guess on the fast-growing South Asian insurance coverage market.
Backed by Asia’s richest banker Uday Kotak, the early-stage negotiations worth the Indian firm at round $800 million, and Zurich Insurance coverage has expresed curiosity in each a minority stake of 49% or taking over a majority 51% stake, the sources stated.
The stake the Swiss insurer desires to safe shall be value round $400 million, they stated.
Kotak continues to be evaluating affords, together with from different traders, however it prefers retaining “management of the corporate” after the stake sale, the primary supply stated.
A spokesperson for Zurich, one among Europe’s largest insurers, stated “as a matter of precept, we do not touch upon market rumours and speculations.” Kotak Common Insurance coverage, which is fully-owned by Indian banking large Kotak Mahindra Financial institution (KTKM.NS), didn’t reply to Reuters queries.
Whereas the Kotak insurance coverage unit’s curiosity in promoting a stake has been reported earlier, its talks with Zurich, the potential deal measurement and valuation are being reported for the primary time.
Greater than 30 corporations function in India’s basic insurance coverage market, the place annual premium collections grew 11% to succeed in $26.7 billion in 2021-22, helped by rising monetary literacy and earnings ranges, CareEdge Scores stated in a report.
Many in India nonetheless contemplate medical health insurance, for instance, as a tax financial savings device. CareEdge added that India stays a vastly underpenetrated market with non-life insurance coverage penetration of 1% in 2021, in contrast with the worldwide common of 4.1%, highlighting “the potential of the trade.”
Already, overseas corporations corresponding to Germany’s Allianz and South Africa’s Lombard have basic insurance coverage partnerships with Indian banking or monetary teams.
The primary supply stated Kotak, which is a comparatively smaller basic insurance coverage participant, is holding stake sale talks because it hopes to get an investor who might help them “flip across the enterprise and develop quicker”.
The Kotak unit reported a lack of $10 million and clocked a premium earnings of $91.35 million in 2021-22, when larger rival HDFC Ergo garnered $1.66 billion.
One trade govt in Europe, who will not be conscious of the present deal talks, stated Zurich has for a number of years evaluated the India market, the place companies are typically extra worthwhile and have higher margins than these in Europe.
In 2017, Zurich stated it needed to develop its presence in markets corresponding to China and India, the place it may “compete with out being a dominant participant”. The corporate operates in additional than 200 nations and supplies life insurance coverage in addition to for well being and vehicles.
India in 2021 relaxed overseas funding guidelines for the insurance coverage sector, permitting corporations to accumulate majority stakes of as much as 74%, from 49% earlier.
Reporting by M. Sriram in Mumbai; Further reporting by Tom Sims and Emma-Victoria Farr in Frankfurt; Enhancing by Aditya Kalra and Jacqueline Wong
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