RIL buys out Bharti from insurance JVs with AXA

KOLKATA: Mukesh Ambani’s Reliance Industries agreed to buy out Bharti Enterprises’ stake in two insurance ventures with France’s AXA for an undisclosed sum, completing the foundation to build a financial services empire which in a few years may compete with the likes of ICICI Bank.

Reliance Industries (RIL), the oil & gas giant, and its arm Reliance Industrial Infrastructure (RIIL), a gas transportation company, will acquire 74% stake in both the life insurance and general insurance ventures that Sunil Mittal’s Bharti Enterprises formed in 2006 to benefit from a booming financial services market. Bharti AXA Life Insurance and Bharti AXA General Insurance, with less than 2% market share, are the two companies in which the Mittals are selling stake.

The transaction also provides scope for AXA to raise its stake in these ventures to 50%, becoming an equal joint venture partner with Reliance, if the government raises the limit on foreign holding in insurance from 26%, a joint statement from Reliance and AXA said. Reliance is negotiating a shareholders’ agreement with AXA, according to people familiar with the transaction.

The French financial services company will have operational control of the new joint ventures, they said. “RIL and AXA will join forces to create market-leading life and general insurance businesses in India by leveraging their respective strengths and expertise,” said the joint statement. The deal is subject to regulatory approvals, including from the Insurance Regulatory Development Authority. Reliance may have agreed to pay $500 million for the stakes, a person familiar with the negotiations said.

Mukesh Ambani’s diversification into business areas once carved out for estranged brother Anil in a family dispute is accelerating more in the financial services space compared with telecom and power. While RIL is yet to pick up steam in telecom, it has dropped plans to build power plants.

At the same time, its joint venture with hedge fund behemoth DE Shaw is looking to become a full-fledged financial services firm. The venture will set up a nonbanking financing company, have a brokerage, as well as float private equity funds that would invest in Indian companies.