Ergo, SocGen on Indiabulls radar for JV

MUMBAI: Leading financial services firm Indiabulls Financial Services (IBFL) has short-listed German insurance major Ergo and French firm Societe Generale (SocGen) for its proposed foray into life insurance business. Sources said both the foreign firms are in an advanced stage of negotiations for a 74:26 joint venture with IBFL. Indiabulls is expected to form a JV with one of them by the month-end. The other two players which were earlier keen to form a JV with IBFL included the UK-based Friends Provident, and Mass Mutual from the US.

When contacted by ET, Gagan Banga, director, IBFL, declined comment. On Tuesday, IBFL stock price rose 4.2% to close at Rs 592.90 at the Bombay Stock Exchange (BSE).IBFL is entering the insurance market at a time when the life insurance business in India seems to be on the verge of an explosive growth. It is planning to invest about Rs 1,000 crore in its new venture.

Sources close to the deal said Indiabulls, which has a strong presence in the broking business and a fast-growing consumer finance business, is planning to leverage its distribution capabilities for its insurance business. The company has also roped in AK Shukla, ex-chairman of LIC, to head the insurance venture. They added that IBFL is also working on a similar JV in the non-life sector as well. “It may take some more time,” one of the sources added.

A Mumbai-based analyst said many Indian financial service players are entering the life insurance sector “to drive up valuations”. On the flip side, the fast-growing life insurance business in India has drawn many global players. A number of global financial majors have evinced interest in the placement with the valuation pegged between $10.5 billion and $12 billion.
Following the 110% growth in the life insurance business in India in 2006-07, there has been a rise in interest in the Indian market. Similar growth rates have been witnessed by the general insurance segment, forcing international insurers to look at launching operations in India.

Apart from IBFL, Ergo is also in talks with L&T Finance for a possible joint venture in life insurance. Ergo, part of the Munich Re group, is also in talks with HDFC for its general insurance foray.Ergo has a premium income of almost $22 billion and is No. 2 in the German primary insurance market, with $133 billion investments. The group, which operates in 24 countries outside Germany, has 28,310 employees.

SocGen has already rolled out a number of businesses like private banking, corporate and investment banking, car leasing and fleet management and asset management in the Indian market. The group’s India strategy is in line with its plans for Asia Pacific, a region where it is eyeing major growth opportunities, especially in emerging markets such as India and China.