Exide Industries, which owns 50 per cent of ING Vysya Life Insurance Co, plans to buy the balance stake from the other shareholders, for about Rs 550 crore.

It now plans to bring in a fresh foreign partner in the life insurance venture.

The lead-acid battery maker today informed the stock exchanges, after an emergency board meeting in Mumbai, that it would buy the remaining equity capital in the insurance company.

Investment option

This would be 26 per cent from ING Group, 16.32 per cent from the Hemendra Kothari group and 7.68 per cent from the Enam group.

Exide had bought the stake in ING Vysya Life Insurance Co (IVL) in 2005 as an “investment” option.

While Exide officials were not available for comment, sources told Business Line that the development was triggered by ING’s decision to exit the insurance business in India, as per the EU bailout agreement entered into in 2008.

Sources close to IVL and market analysts feel the development augurs well for the Indian private sector life insurer.

Good for IVL

“IVL’s business has matured in terms of processes, product portfolio and management. So, the exit of ING is not likely to affect its business. On the contrary, Exide’s acquisition will help remove the uncertainty,” a source close to IVL said.

According to him, Exide, with its debt-free balance-sheet, is perfectly positioned to take care of IVL’s short-term capital requirements. In the longer run, the life insurance company will be an attractive investment for foreign players gearing up to enter India following revision of the FDI cap to 49 per cent.

Impact on Exide

The IVL acquisition will, however, reflect on Exide’s balance-sheet till it ropes in a new partner.

This will happen at a time when there is an improvement in Exide’s profitability, under pressure given the auto sector slowdown.

Analysts, however, are confident that this is an interim arrangement.

“There may be some impact (on Exide’s balance-sheet) in the short term. But that is a very temporary phenomenon,” Rikesh Parikh, Vice-President, Markets Strategy and Equities, Motilal Oswal Securities, said.


(This article was published on January 23, 2013)
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