Germany's HDI-Gerling pays four times premium for a 26% stake in Magma General Insurance

KOLKATA: German insurance company HDI-Gerling International Holding AG has paid four times premium on Rs 26 crore for its 26% stake in Magma HDI General Insurance Co with a commitment of raising the holding to 49% when the government allows it.

The two-way joint venture between HDI and Magma Fincorp will start operation with Rs 208 crore capital while Rs 100 crore is the paid up. Both the partners has invested proportionately towards the paid up capital.

HDI has paid the premium as it will get a ready distribution network of Magma, which caters to three lakh customers in 20 states.

"We will immediately raise our holding to 49% once the government allows it," said HDI-Gerling director Jens Wohlthat.

Magma Fincorp vice chairman and managing director Sanjay Chamria said the agreement between the two partners has an in-built provision to this end.

He has announced the launch of the general insurance company on Thursday.

Magma HDI General Insurance company plans to focus on semi-urban and rural markets, where Magma enjoys an advantage. ""We have a low-cost distribution model,"" Chamria said.

The company will start business with five motor insurance policies while it has sought clearance for 50-odd schemes.

"We aim to do a business of Rs 100 crore in the first year," chief executive officer Swaraj Krishnan said.