The Hindu Business Line : Allianz can raise stake in Bajaj ventures

Mumbai May 17 The Munich-based Allianz SE can raise equity stake in its life and non-life insurance ventures with Baja Auto, when the Government hikes the permissible foreign direct investment limit from the current 26 per cent. Allianz has the option to raise its equity in the general insurance company to 50 per cent and life insurance to 74 per cent, said a statement from Bajaj Auto today.

Bajaj Auto and the German Allianz currently hold 74 per cent and 26 per cent stake, respectively, in both ventures. The purchase price of the shares will be determined by the timing of exercising the call and put options, as per the joint venture agreement filed with IRDA.

Options

For options exercised until April 22, 2016, in the non-life insurance venture (Bajaj Allianz General Insurance), Allianz would have to pay Rs 10 per share and interest compounded at 16 per cent per annum from April 23, 2001.

For options exercised after April 22, 2016, Allianz will have to pay the highest among three methods - the earlier mentioned pricing formula, price of the stock if the venture is listed or a fair value of the company as determined by a mutually accepted accounting firm.

A similar arrangement applies to the pricing of the shares of the life-insurance venture, Bajaj Allianz Life Insurance. Each share will initially cost Rs 5.42 in addition to an interest of 16 per cent per annum from July 31, 2001 to the date of payment. If the call option is exercised after July 30, 2016, Allianz will have to use the same method as for the non-life insurance company.

"Keeping in mind the long gestation associated with such ventures, especially life insurance, the put option and pricing formula ensure safety of investments and assured 16 per cent return on the same in the initial years," Mr Rahul Bajaj, Chairman, Bajaj Auto, said in a statement.

More Stories on : Insurance | Restructuring | Life Insurance | General Insurance | Bajaj Auto Ltd

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