[MUMBAI] Fairfax financial Holdings is in early talks to sell 25 per cent of India’s biggest non-public common insurer ICICI Lombard in a deal that would fetch as much as US$ 1 billion, because the Canadian agency appears to be like to money out and start a brand new insurance joint venture, sources familiar with the matter said.
ICICI Lombard is a three way partnership formed in 2001 between ICICI bank, India’s second largest financial institution, and Fairfax, which is led by way of Canadian billionaire Prem Watsa.
Fairfax, which owns a 35 per cent stake within the undertaking, has viewed the worth of its funding surge over the last 5 years, as India’s general insurance coverage market and ICICI Lombard have grown at a compounded annual charge of over 16 per cent. vehicle possession in the country has surged and the market remains below-penetrated.
lowering its stake to 10 per cent will allow the Canadian firm to start a new basic insurance three way partnership in India, which it goals to do, probably the most sources said, adding foreign buyers can’t personal greater than 10 per cent of two insurance coverage companies, as per Indian laws.
personal equity companies, including Blackstone crew and KKR & Co, in addition to some Canadian pension money have expressed hobby in Fairfax’s stake, the sources said.
ICICI may also seem to promote a ten per cent stake in the unit on the related time, one supply said. patrons are likely to pay a bigger top rate for a stake in ICICI Lombard if they’re able to get as a lot as a 3rd of the company, the sources stated.
Two sources stated a deal is prone to be finalised within the subsequent two months.
Fairfax may redeploy one of the proceeds to fund its US$ 4.9 billion takeover of Swiss insurer Allied World, a supply said.
ICICI, Fairfax, Blackstone and KKR did not reply to requests for comment.
The sources, who declined to be named as they are not permitted to publicly discuss the topic, said discussions are within the early levels and it was once now not yet clear what any ultimate deal would look like.
Fairfax has no longer but chosen a financial institution to run a sale course of, they said.
ICICI Lombard, with an 8.8 per cent market share, is a big participant in the vehicle, house, well being and trip insurance space with gross written premiums of US$ 1.2 billion in fiscal 2016.
Fifteen months in the past, ICICI Lombard used to be value US$ 2.5 billion, according to the worth of a stake ICICI offered to Fairfax at the time. Now, two of the sources pegged its price at about US$ 4 billion, while a 3rd stated ICICI Lombard is value about US$ 3.2 billion.
the variety places the worth of a 25 per cent pastime in the insurer at between US$ 800 million and US$ 1 billion.
Fairfax has already submitted an preliminary proposal to India’s insurance coverage business regulator, IRDA, for a brand new general insurance coverage joint venture and met with the regulator this week, three sources mentioned.
The Canadian agency can be extra inclined to proceed with the ICICI Lombard partial stake sale if it gets a nod from IRDA to maneuver forward on the challenge, the sources stated.
Fairfax plans to keep a forty five per cent stake in the new challenge, so as to in the beginning center of attention on the trip insurance market, one of the vital sources said.
Kamesh Goyal, a former senior executive at Allianz , would spearhead the brand new challenge and personal a 15 per cent stake in it with different buyers buying up the rest, the source said.
the general initial funding in the project is likely to be US$ 50 million, the supply stated.
Indian rules permit overseas buyers to come clean with 49 per cent in Indian insurers.
REUTERS
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