Ending its five-year
partnership with French insurer Axa, Indian conglomerate Bharti
Enterprises is to sell its 74% stakes in their life and general
insurance joint ventures (JV) to Reliance Industries (RI) and its
subsidiary Reliance Industrial Infrastructure (RII) for an
On the deal’s closing, RI
will have a 57% stake of Bharti Axa Life Insurance and Bharti Axa
General Insurance and RII stakes of 17% in each insurer.
Bharti said the sales were in
keeping with its strategy of focusing on areas “where it is making
a deeper impact”. Bharti’s other interests include India’s biggest
mobile phone service provider.
A feature of the deal between
Axa, RI and RII is Axa’s option to increase its stake in the JVs if
maximum foreign ownership of Indian insurers is lifted from
The option would enable Axa
to up its stakes to 50% with RI’s and RII’s stakes falling to 45%
and 5%, respectively.
In RI Axa will have a partner
that on all key metrics is India’s largest private company. RI’s
core operations are in oil and gas and as at 31 March 2011 its
turnover was $58bn and net profit $4.5bn.
RI’s entry into the insurance
market carries with it an element of sibling rivalry. RI was
founded in 1983 by the late Dhirubhai Ambani and is now controlled
by Mukesh Ambani, one of his sons.
Mukesh Ambani’s younger
brother Anil Ambani controls Reliance Anil Dhirubhai Ambani Group
which has among its subsidiaries Alliance Capital which controls
Indian insurers Alliance Life and Alliance General.
Japanese insurer Nippon Life
is awaiting regulatory approval to buy 26% of Reliance Life for
$680m, the largest foreign direct investment yet in India’s
financial services industry.
Alliance Life is one of the
top-four among India’s 22 private life insurers and has a market
share of about 10% in the private life sector. In its year to March
2010, Alliance Life reported premium income of $1.46bn.
Bharti Axa Life is a far
smaller player than Alliance Life. In in the 12 months to March
2011 it reported premium income of about $195m.
Bharti Axa General reported premiums of about