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Tokio Marine, a leading Japanese insurer, has raised its stake in its Indian joint venture unit IFFCO Tokio General Insurance to 49 per cent, the maximum foreign stake allowed under Indian law.
Prior to this transaction, Tokio Marine Asia had 26 per cent stake in the joint venture. The additional 23 per cent stake has been purchased for ₹2,530 crore.
Enterprise value
The enterprise value of IFFCO Tokio Marine, the fourth largest general insurer in India, is now pegged at ₹11,000 crore.
While IFFCO has divested 21.64 per cent stake in IFFCO Tokio General Insurance for ₹2,380.40 crore, Indian Potash has sold its entire holding of 1.36 per cent for ₹149.60 crore. The transfer happened at a price of ₹408.43 per share.
The average cost for IFFCO for the 21.64 per cent stake stood at only about ₹120 crore, IFFCO officials said.
US Awasthi, Managing Director, IFFCO, said that the IFFCO Tokio General Insurance Board met on Friday and approved the share transfer.
With the additional 23 per cent stake buy, Tokio Marine Asia will have three more directors in the board, taking the total number of Tokio Marine directors to five.
IFFCO, which now has 51 per cent stake, will continue to have six directors. Taken together with the Managing Director and three independent directors, the total board strength now stands at 15.
Awasthi said this was a good opportunity for IFFCO to unlock value of its investment in IFFCO Tokio General Insurance by sale of its part shareholding.
This transaction will help IFFCO in raising the required capital to focus more on agricultural businesses and to better serve the interests of the Indian farmers in the fast changing agriculture sector in India, Awasthi said. Even after the divestment, IFFCO will continue to exercise control in the business affairs of IFFCO Tokio in compliance with IRDAI’s guidelines on “Indian owned and controlled” insurance companies, he added.
It may be recalled that after opening up of the insurance business for private sector in the year 2000, IFFCO and Tokio Marine had joined hands to set up this 74:26 non-life insurer — IFFCO Tokio General Insurance.
Commenting on the Tokio Marine’s move to buy additional 23 per cent, Arthur Lee, Chief Executive of Tokio Marine Asia, said this demonstrates the commitment “we have for India”.
“Our journey in India continues for us,” Lee added.
Meanwhile, IFFCO sources said that there is no right conferred on Tokio Marine under the joint venture agreement to automatically hike its stake in the future.
This would be the case even if Centre were to further raise the foreign investment cap from the current 49 per cent to, say, 74 per cent or 100 per cent.
Not eyeing IPO for now
Asked if IFFCO Tokio General Insurance will still look at an IPO in the coming days, Awasthi said there was no plan to take the general insurer public for the next few years.
“We have not closed our mind on an IPO. We may look at it after 4-5 years. It’s just that we are not keen on it right now. Our soul continues to be that of a cooperative,” he said.
IFFCO officials said that the general insurer qualified on all parameters for going public. There is no bar and IFFCO Tokio General Insurance can still raise capital in the coming years by going public with an IPO, they said.
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