Birla Group enters the fray to acquire IDBI Federal Life

MUMBAI: Aditya Birla Group’s life insurance arm Birla Sun Life has joined the race to buy IDBI Federal Life Insurance by matching Max Life Insurance’s offer of more than Rs 6,000 crore, said two people aware of the development.

The sale process, which started over a year ago, has seen interest from several insurance companies and private equity funds.

“Birla Sun Life has matched the offer of Max Life Insurance for IDBI Federal Life Insurance,” said a source close to the development. “Max has been the most aggressive bidder so far, valuing the company at over Rs 6,000 crore.”


Birla Sun Life declined to comment.

Investment bank JP Morgan has been appointed to shepherd the stake sale by IDBI Federal Life Insurance.

IDBI Federal distributes products through a multi-channel network. It had seen interest from nine companies that submitted bids: These included Kotak Life, Max Life Insurance and Exide Life Insurance.

The life insurance arm of IDBI Bank, a joint venture with Federal Bank and Ageas of Europe, is much sought after because of the distribution reach. Apart from around 3,000 branches of the two promoting banks, it sells products through the direct channel and insurance brokers.

Birla Sun Life has been looking to scale up the business through bancassurance, or selling insurance products through banks. Bancassurance is the most sought-after distribution channel. With IDBI Federal having two bank partners, bidders are interested more in distribution than just the books of the company.

Birla Sun Life is a 51:49 joint venture between Aditya Birla Capital Ltd and Canada’s Sun Life.

The absence of a strong bancassurance partner has been impeding Birla Sun Life’s distribution with the premium mix shifting towards group businesses. It is ranked 4th in the group new business with 8 per cent market share. In the last fiscal year, total new business premium grew 5 per cent when the private sector grew 18 per cent.

The company has 4.5 per cent market share, with the total new business premium of Rs 2,663 crore in FY18 versus Rs 2,535 crore in FY17.

As on March 31, 2018, IDBI Federal Life Insurance had an embedded value of Rs 1,800 crore.

IDBI Federal is ranked 14th in total new business. It had posted a 5 per cent increase in income from selling new policies at Rs 833 crore in the last financial year ended March 31.