Tatas exit race to buy Reliance Capital’s general insurance arm

Industry:    2022-06-24

Tata AIG General Insurance Company, a subsidiary of Tata Sons, has exited the race to buy the general insurance arm of Reliance Capital, Reliance General Insurance Company (RGICL), following the delayed sale and in light of a rule that the company will have to bid for few other companies along with other bidders as partners.

The rule to bid for more than one cluster and with other bidders was made mid-way by the lenders so as to get better bids for all assets. “The Tata group was interested only in the general insurance company but they were asked to bid for other clusters too by forming a consortium. As the expression of interest was made by Tata AIG General Insurance, they were not interested in bidding for other businesses and hence they have exited,” said a banker close to the development.

The Tata group did not comment on the development. The sale of assets by lenders has already been delayed as they have sought time till November to conclude the sale of assets of Reliance Capital, which was sent for debt resolution to the bankruptcy court last December.

Tata AIG is owned by Tata Sons and AIG, which hold 74 per cent and 26 per cent in the company, respectively. Tata AIG has a strong presence in the commercial business segment because of the expertise derived from its parent, AIG, and the company was looking to increase its retail and small and medium enterprise (SME) business through the acquisition of RGICL.

RGICL has emerged as one of the leading players in the non-life insurance space with nearly 4.2 per cent market share in the general insurance sector as of financial year 2020-21 (FY21). RGICL’s investment portfolio stood at Rs13,861 crore as on December 31, 2021, with Rs 13,414 crore in debt securities. Almost half of the total debt investments were in government securities and 24 per cent in highly-rated debt instruments. In the nine months ended December 31, 2021, RGICL made a profit of Rs197 crore and earned gross premium of Rs 7,200 crore.

With the Tatas exiting the race, bankers said the race is now between Piramal Enterprises and the Torrent group, which are conducting due diligence for the entire company. For the general insurance cluster, though, Zurich Insurance Group and American private equity giant Blackstone have shown interest, while Cholamandalam Group has evinced interest in the life insurance cluster.

Several lenders, including Life Insurance Corporation of India, have made total claims of Rs 23,666 crore against Reliance Capital. As the sale of assets has been delayed, LIC has sought bids from asset reconstruction companies to sell its loan worth Rs 3,400 crore, according to an advertisement by IDBI Capital Markets & Securities.

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