US Insurer MetLife International Holdings is eyeing increasing its stake in its Indian joint venture through each of its holding companies, comprising of IGE (India) Private Limited and Elpro International Limited in the company. MetLife International Holdings is planning to acquire a 15.27 percent shareholding in PNB MetLife in exchange for a cash consideration of Rs 1,906 crore. On concluding this deal, the cumulative shareholding of MetLife International Holdings would amount to a totality of 47.325 percent. However, this transaction is still subject to all mandatory regulatory approvals, as stated by the company.
Surbhit Dabriwala, who is the Director of Elpro International, commented on this with, “I am pleased that this transaction supports MetLife’s continued growth in India and will enable us to deliver even more value for our customers, partners and shareholders. The Dabriwala family has been a strong supporter of PNB MetLife and valued members of its board, and we thank them for their contribution to the company. We have enjoyed a strong relationship with MetLife for close to 20 years and seen PNB MetLife grow. Our involvement in PNB MetLife is part of a long tradition at Elpro of working with leading multinational partners in India, including in past ventures with GE and FANUC.”
This deal has been made in line and availing of the relaxed limit for foreign companies’ investment into India’s Insurance Industry, as announced by the Finance Minister, Smt. Nirmala Sitharaman, as elaborated in her 2021-2022 Budget Speech, was a direct incentive for European and US insurers to invest in the country. In accordance with her speech, Foreign Institutional Investors (FII) are now permitted to hold up to a limit of 74 per cent of private insurance companies in India, a steep boost from the earlier restriction of 49 per cent.
Upon the finalization of this transaction, MetLife’s shareholding in PNB MetLife will make it the largest shareholder in the private life insurance sector. It also marks the very first foreign company to increase its stake in the joint venture based in India and avail the new relaxed regulatory policies articulated by the government in the Indian Insurance Sector.
Even though the government had allowed FDI of up to a limit of 49 per cent in the insurance sector, as of March 2020, foreign investment in life insurance firms was stranded at a value of only 37.41 per cent. One in nine private life insurers, the foreign investment was 49 per cent. Insurance experts had envisaged that by allowing foreign ownership and control, foreign partners, who were so far not interested in increasing their stake from 26 per cent, may look to buy off their Indian partners.
Also, this marks the second merger and acquisition activity in the life insurance sector in the past month after HDFC Life acquired a 100 per cent stake in Exide Industries-promoted Exide Life Insurance for Rs 6,687 crore, in a bid to enhance its proprietary channel.
As reported, in the financial year 2020-2021, PNB Met Life earned a total premium of Rs 6,033 crore, with an addition of Rs 1,996 crore as new business premiums. Additionally, it maintained a solvency ratio of 190 per cent, against the regulatory requirement of 150 per cent.
The company in focus, PNB MetLife India Insurance Company Limited, is a leading life insurance company present in India lead by Ashish Kumar Srivastava as the Managing Director and CEO has been operating since 2001. The major stakeholder in PNB MetLife is MetLife International Holdings LLC (MIHL), followed by Punjab National Bank (PNB). Their other stakeholders include Jammu & Kashmir Bank Limited (JKB), M. Pallonji and Company Private Limited and other private investors. Operating with a base in more than 7000 locations, it provides a wide range of insurances including health, life and retirement insurance products.
Initially launched in 2001 it was priorly branded as MetLife India Insurance Company Limited, after which PNB picked up a 30% stake in MetLife India Insurance in the year 2011. The complete approval of this was ultimately given to PNB and MetLife India Insurance by the Competition Commission of India (CCI) in January 2013. After that, this new private sector life insurer Joint Venture was re-branded as PNB MetLife India Ltd. The Dabriwala family, through their companies, IGE India Pvt Ltd and Elpro International, had been one of the first investors. It has widely expanded to having its presence in more than 150 locations, serving nearly 200 million customers based in about 7000 locations.
This is most definitely a positive sign for the company, the evidence of which was reflected on Elpro International’s share prices shooting up in the stock market. Following the announcement of this news by MetLife International Holdings on Monday evening, Elpro International Ltd’s shares observed a sharp spike on Tuesday by opening at ₹ 72.65 on Tuesday after closing on ₹ 60.55 on Monday and on Tuesday, it ultimately closed at ₹ 72.3. This spike in prices shows a very positive response of the market sentiment on this acquisition of increased stakeholding.
Edited by Sanjana Simlai.