Amazon.com Inc.’s Indian private equity partner Samara Capital has emerged as the frontrunner to buy the insurance broking unit of Aditya Birla Capital Ltd, two people directly aware of the development said on the condition of anonymity.
“Over the past few weeks, Samara Capital and Aditya Birla Capital (the promoter of Aditya Birla Insurance Brokers Ltd) have been negotiating the valuation. For Samara, entering the financial services business is a crucial part of its strategy,” one of the two people cited above said, adding the private equity firm has made an offer for the insurance broker. If the negotiations are successful, a deal may be reached at a value of ₹800-1,000 crore, making it one of the largest transactions in the broking space, the people said, requesting anonymity.
“The discussions are at an advanced stage, and the deal may be formalized and announced in the next few days,” the first person said. “After the due diligence by Samara, the completion of the deal may take 3-4 months.”
The sale of Aditya Birla Insurance Brokers is part of parent Aditya Birla Capital’s strategy to reorganize its financial services operations and divest from businesses that have limited growth potential under its management.
A spokesperson for Aditya Birla Group declined to comment, while emails and messages sent to Samara Capital’s spokesperson remained unanswered.
Aditya Birla Capital invited bids for the insurance broker about three months ago, the people said. Aditya Birla’s insurance broking firm is one of India’s largest in selling both life and non-life policies.
According to the Aditya Birla Capital annual report, the broking arm’s revenue rose 16% to ₹693 crore in FY22 from ₹595 crore in the previous year.
Aditya Birla Insurance Brokers’ non-life direct premium placement grew 17% to ₹5,505 crore as of 31 March from ₹4,718 crore in the year earlier.
Motor insurance, its main contributor to premium placement, grew 21% from a year earlier. Its market share in direct non-life industry premiums increased from 2.37% to 2.49%. The firm’s profit before tax for the fiscal year increased by 22% to ₹86.02 crore, and its profit after tax stood at ₹64.06 crore.
Through its 350-odd employees, the company provides insurance broking, reinsurance solutions and advisory services to companies and individuals.
If completed, the deal will be Samara’s second transaction with Aditya Birla Group. Samara and Amazon are partners in Witzig Advisory Services Pvt. Ltd, an investment vehicle which acquired More Retail Pvt. Ltd from Aditya Birla Group in September 2018.
According to an industry expert, the new management of Aditya Birla Capital under chief executive officer Vishakha Mulye is looking to restructure the company and exit some of the businesses where scalability is an issue.
Mulye, according to the industry expert, after taking charge as the chief executive in April, has been working on building synergies within the group to facilitate the cross-selling of financial products to customers of Aditya Birla group firms.
“Considering the rapid growth in the insurance market since the outbreak of the covid-19 pandemic, it may be the best time for a company (such as Samara Capital) to get into the insurance broking business and also the most opportune time for a group (Aditya Birla Group) to get the fairest possible value for its insurance broking business,” the industry expert said.
According to the second person cited above, Samara Capital has recently raised around $500 million for a new fund targeting companies in the world’s fifth-largest economy.
The Mumbai-based private equity investor is looking to invest the fund in businesses ranging from retail and healthcare to technology and finance, Sumeet Narang, Samara’s founder and managing director, had said in an interview with Bloomberg in February.
Samara has invested at least $1 billion since its inception in 2007.
