Financial Daily from THE HINDU group of publications
Tuesday, Oct 22, 2002
Money & Banking
Cholamandalam insurance co in talks with Mitsui
Mr M.A. Alagappan, Chairman, Cholamandalam General Insurance Company Ltd, flanked by Mr M. Anandan, Managing Director, Cholamandalam Investment and Finance Co Ltd (right), and Mr Arun Agarwal, chief executive, Cholamandalam General Insurance, at a press conference in Chennai on Monday.
CHENNAI, Oct. 21
CHOLAMANDALAM General Insurance Company Ltd, part of the Chennai-based Murugappa group, will consider roping in a partner as and when "a good party comes along".
At present, Cholamandalam General Insurance is entirely owned by the Murugappa group with Tube Investments of India Ltd holding 75 per cent stake, Cholamandalam Investment and Finance Co Ltd 15 per cent and two private companies belonging to the group the balance 10 per cent of the Rs 105 crore capital.
Answering questions at a press conference to announce the launch of operations of Cholamandalam General Insurance Co Ltd (CGICL), its Chairman, Mr M.A. Alagappan, said that some discussions were going on with Mitsui of Japan for a possible stake in the venture.
He said that the Murugappa decided to go it alone for the insurance venture after earlier attempts to have a partner did not take off due to various reasons.
CGICL kicked off its operations across seven cities with plans to cover a total of 30 cities by December 2003. This financial year it hopes to do business of about Rs 25 crore and targets about Rs 100 crore in the first full year of operation.
It hoped to break even in the fourth year. In the fifth year of operation it expected to do business worth Rs 500 crore. The promoters did not anticipate the need to infuse additional capital till the third year. "As per our business plan, maybe in the third year, we will need to bring in a little bit of capital," he said.
Mr Arun Agarwal, Chief Executive, CGICL, said that the Murugappa group's outgo on insurance this year would be Rs eight crore. Apart from that, there was nearly Rs 25 crore insurance on the vehicle finance division.
Both Mr Alagappan and Mr Agarwal emphasised that the Murugappa group companies would not automatically shift their insurance to CGICL, but would do so only after CGICL proved that it could provide the same level of service that the companies were getting now.
CGICL had spent about Rs 12 crore on creating an IT infrastructure for its operations and the customised web-enabled software was purchased from a Mumbai-based company.
To a question, Mr Alagappan said that the group would have to take a relook at its 50:50 joint venture risk management, Cholamandalam Axa Risk Management Services, if and when it got a partner for the insurance business.
Mr Agarwal said that CGICL was training itself to be an active player in the health insurance sector, by keeping its underwriting standards high.
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