Hero FinCorp Ltd, the financial services arm of India’s largest two-wheeler maker Hero MotoCorp Ltd, plans to enter the non-life insurance business and is looking to acquire a controlling stake in an existing general insurance company, two people with direct knowledge of the matter said.
Hero FinCorp was until recently in talks with Future Generali—a joint venture between Kishore Biyani’s Future group and Italy’s Generali group—but the talks were not successful, the people mentioned above said on condition of anonymity as the talks are private.
Emails sent to Hero FinCorp and Future Generali remained unanswered until press time.
“The talks failed because of mismatch in valuation,” the first person cited above said, adding that Hero FinCorp had also begun discussions with potential buyers to sell equity stake to raise capital for the acquisition.
Mint had reported in August that Hero FinCorp Ltd was looking to raise up to Rs1,000 crore at a valuation of $1 billion and that it had mandated Credit Suisse to manage the fundraising. The investment bank had approached several large domestic and global private equity funds for a potential investment.
“The company is no longer actively considering a stake sale for now,” said the second person cited above, adding, “but once another target is identified, talks will resume.”
Hero FinCorp, a non-banking financial company (NBFC), is led by Abhimanyu Munjal, younger son of the late Raman Munjal, elder brother of Pawan Munjal, chairman, managing director and chief executive of Hero MotoCorp.
The company, which offers auto loans, loan against property, bill discounting and inventory funding, had a total credit portfolio of close to Rs10,028 crore as on 30 June 2017. The NBFC has set a target of a loan book size of Rs35,000 crore by 2020, Mint reported in September.
Hero MotoCorp has a 40.3% stake in Hero FinCorp, while the rest is owned by other entities of the Hero Group and private equity funds.
Hero FinCorp started its housing finance business last year by incorporating Hero Housing Finance Ltd, the group’s home finance arm.
“The foray into the insurance sector is the next step towards becoming a full-fledged financial services company like Bajaj Finserv which owns Bajaj Allianz General Insurance,” said the second person. The insurance sector in India has seen a number of deals in the past one year, in both life and non-life segments. Mint reported in July that IDBI Federal Life Insurance, a three-way joint venture between IDBI Bank, Federal Bank and Belgian insurer Ageas, was exploring the possibility of a 100% stake sale, which would potentially lead to a complete exit for all three stakeholders. In April, Religare Enterprises Ltd (REL), promoted by Malvinder and Shivinder Singh, announced the sale of its entire 80% stake in Religare Health Insurance Co. (RHI) to a consortium of investors led by private equity firm True North.
Mint reported in August that Star Health and Allied Insurance Co. Ltd, which focuses on health, travel and accident insurance, is looking to raise up to Rs3,000 crore in funding through primary and secondary stake sales. The Times of India reported in October that Star Health is seeking a valuation of close to $1 billion in valuation.
Source: Mint