The billionaire Burman family is set to pare its stake and give up control of a life insurance joint venture with UK’s Aviva Plc as part of its strategy to raise capital for the core consumer goods business, two people with direct knowledge of the matter said.
The deal will see the Burman family stake drop to 26% from the current 51% in Aviva Life Insurance Co., the people said, requesting anonymity. Aviva’s holding will rise to 74%, giving the foreign partner control of the life insurer.
“Going by the current actuarial valuations, the 25% stake to be augmented by Aviva could be worth at least ₹1,500 crore. The business is growing, and Aviva Life’s potential is huge, given the niche markets and customer segments in which Aviva Life has a better grip than other life insurers in India,” one of the two people said.
“If all goes well, the deal is likely to be announced within two months,” this person said.
Confirming the proposed transaction, Mohit Burman, chairman of Aviva Life Insurance Co. and vice-chairman of Dabur India, said: “Aviva Plc has decided to increase stake from 49% to 74% when the regulations permit, and the Burman family will continue to be the JV partner.”
Founded 137 years ago, the Burman family-owned Dabur is known for brands, including Vatika hair oil, Real fruit juices and Hajmola digestive candy, among other fast-moving consumer goods (FMCG). The family’s private holdings range from restaurants to home healthcare to life insurance.
The Burman family, which is actively seeking to grow its range of financial services businesses such as investment banking, mutual funds and insurance, has sharpened its focus on the FMCG business under Dabur India. This may see the family monetize stakes in certain businesses and mobilize the proceeds to expand the product range and boost Dabur’s FMCG businesses, which have received a thrust since the coronavirus outbreak last year.
To be sure, the Burman family, among the top 20 richest in India, with an estimated net worth of around $10 billion according to Forbes rich list, has been looking to monetize its stake in Aviva Life for quite a few months and had also entered into stake-sale talks with e-commerce firm Flipkart’s co-founder Sachin Bansal.
The talks, however, did not materialize because of differences over valuations and ownership terms, the second person said.
“Sachin Bansal of Navi Technologies held several rounds of discussions with the Burman family, negotiating the terms of the deal to buy the Burman family’s entire stake in Aviva Life,” the person said.
“This was last year. Discussions and negotiations with Bansal were over in March, and we were not able to come to any conclusion,” Mohit Burman said.
“Neither Bansal nor Navi is currently in talks to buy any stake,” said an official at Navi Tech seeking anonymity.
Meanwhile, Aviva, the world’s fifth-largest life insurer, seems to be upbeat about India’s insurance business potential. In 2016, soon after the government lifted the foreign direct investment limit in the insurance sector, Aviva picked an additional 23% in the life insurance venture from Dabur Invest Corp. for ₹940 crore. The deal valued Aviva Life at about ₹4,087 crore.
Among other private life insurers Aviva Life, too, fared well in fiscal 2021, with new business premium growing to ₹220.2 crore from ₹217.53 crore in fiscal 2020. However, since the start of this fiscal, it appears to be struggling to grow its business as compared to other life insurers.
According to the Insurance Regulatory and Development Authority of India (Irdai), Aviva Life recorded new business premium of ₹39.44 crore in the June quarter, lower than ₹47.21 crore a year ago. The Indian private life insurance industry grew 33.7% in the same period.
Both the people cited above said Aviva has been keen to grow its India business and was waiting for New Delhi to further raise FDI limit in the sector to 74%, which finally happened in the 2021-22 Union Budget.
