BoM quits insurance JV with Shriram Fin, Sanlam of SA
Pune-based Bank of Maharashtra (BoM) has decided to walk out of the three-way general insurance joint venture (JV) with Shriram Financial and Sanlam of South Africa.
By TNN |
MUMBAI: Pune-based Bank of Maharashtra (BoM) has decided to walk out of the three-way general insurance joint venture (JV) with Shriram Financial and Sanlam of South Africa. Following this, Chennai-based Shriram group has raised its stake from 59% to 79% in the non-life JV insurance with Sanlam of South Africa.
Shriram and Sanlam have decided to go ahead with the venture. According to agreement between the three agreed upon in December 2006, BoM was to acquire 15%, Shriram Financial was to pick up 59% while Sanlam would have 26%. The proposed company will start with Rs 100-crore capital.
���We had differences on some terms and conditions. At the moment, we are not looking at entering into any other joint venture tie-up for non-life insurance,��� said BoM chairman and managing director MD Mallya.
On Wednesday, the bank informed the Bombay Stock Exchange that ���the terms of the JV could not be finalised as per the bank���s requirement, and hence, the bank has opted out of the said JV���.
���The Shriram group has informed insurance regulator IRDA of its decision to raise its stake from 59% to 79%,��� said a senior IRDA official. Only last week, the IRDA board gave the first-level clearance for the non-life venture.
Sources said that key dispute was concerning the agreement drawn for the venture documents which did not predetermine the price at which the additional capital was to be raised in the future. The bank wanted to have a fair idea of capital outflow by pre-fixing the premium for fresh capital infusion.
Differences also arose, when the document indicated the price at which the foreign partners will buy back shares from Shriram (when the sector opens up), but it did not spell out the price that would be offered to the bank. There were also differences over the premium that BoM was required to pay for the venture.
According to sources, the Shriram group had made it clear that it would offer only a 15% stake to BoM.
For the Shriram group, this will be the second venture with Sanlam Group in the life segment. Shriram Life was launched in 2006. Besides life insurance, the Sanlam group operates in areas of group schemes, retirement funds, asset management and other financial services.
Currently, BoM has bancassurance tie-up with United India Insurance for distributing general insurance products. The proposed non-life JV with the Shriram group was expected to provide a good opportunity to the bank to cross-sell insurance, along with the traditional banking products.
Shriram and Sanlam have decided to go ahead with the venture. According to agreement between the three agreed upon in December 2006, BoM was to acquire 15%, Shriram Financial was to pick up 59% while Sanlam would have 26%. The proposed company will start with Rs 100-crore capital.
���We had differences on some terms and conditions. At the moment, we are not looking at entering into any other joint venture tie-up for non-life insurance,��� said BoM chairman and managing director MD Mallya.
On Wednesday, the bank informed the Bombay Stock Exchange that ���the terms of the JV could not be finalised as per the bank���s requirement, and hence, the bank has opted out of the said JV���.
���The Shriram group has informed insurance regulator IRDA of its decision to raise its stake from 59% to 79%,��� said a senior IRDA official. Only last week, the IRDA board gave the first-level clearance for the non-life venture.
Sources said that key dispute was concerning the agreement drawn for the venture documents which did not predetermine the price at which the additional capital was to be raised in the future. The bank wanted to have a fair idea of capital outflow by pre-fixing the premium for fresh capital infusion.
Differences also arose, when the document indicated the price at which the foreign partners will buy back shares from Shriram (when the sector opens up), but it did not spell out the price that would be offered to the bank. There were also differences over the premium that BoM was required to pay for the venture.
According to sources, the Shriram group had made it clear that it would offer only a 15% stake to BoM.
For the Shriram group, this will be the second venture with Sanlam Group in the life segment. Shriram Life was launched in 2006. Besides life insurance, the Sanlam group operates in areas of group schemes, retirement funds, asset management and other financial services.
Currently, BoM has bancassurance tie-up with United India Insurance for distributing general insurance products. The proposed non-life JV with the Shriram group was expected to provide a good opportunity to the bank to cross-sell insurance, along with the traditional banking products.
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