Future Enterprises agrees to sell 25% stake in insurance JV to Generali – Business Standard

Future Enterprises has agreed to sell a 25 per cent stake in its general insurance joint venture, Future Generali India Insurance Company Limited (FGIICL) to its partner, Generali Participations Netherlands N. V. (Generali) for a cash consideration of Rs 1252.96 crore or € 145 million, plus an additional consideration that is linked to the date of the closing of the transaction, the former said in a stock exchange filing. Once the transaction is completed, Generali will hold a stake of around 74 per cent in FGIICL.

Generali has also acquired an option to buy out the company’s remaining interest in FGIICL, directly or through a nominee, at an agreed valuation subject to applicable regulatory approvals. The transaction is subject to applicable regulatory approvals and other customary conditions.

Further, Generali has also received an approval from the Competition Commission of India to increase its stake in the life insurance joint venture it has with Future Enterprises, Future Generali India Life Insurance Company Limited (FGILICL), by purchasing 16 per cent stake held by Industrial Investment Trust in the company for € 26 million. In addition, Generali will subscribe to a preferential allotment of shares in FGIL of the company, (around € 21 million). Following these transactions, Generali’s stake in the life insurance company will go up to 68 per cent which may increase further to 71 per cent by the end of 2022, following further preferential allotment of shares.

After these transactions by the Generali group, it will become the majority shareholders in both the insurance joint ventures it has with the Future Enterprises, thus becoming the first international insurer to take up majority stake in both its Indian insurance joint venture companies since the new foreign ownership cap came into effect. In the last year’s union budget, the Indian government allowed 74 per cent foreign direct investment in the insurance sector from 49 per cent earlier, and allowed foreign ownership and control with safeguards.

“The transactions are fully in line with the ‘Lifetime Partner 24: Driving Growth’ strategy, strengthening Generali’s position in fast-growing markets and confirms the Group’s commitment to deliver profitable growth whilst creating value for customers, consistent with Generali’s Lifetime Partner ambition”, Generali said in a statement on Thursday.

Commenting on the development, Jaime Anchústegui Melgarejo, CEO International, Generali Group said, “With an expected double-digit annual growth rate, India’s insurance market offers considerable opportunities, and we look forward to deepening our presence in this geography, becoming Lifetime Partners to an increasing share of Indian customers”.

In FGIICL, the general insurance arm of the Future Enterprises, both Future Enterprises and Generali Participants Netherlands N.V. hold 25.5 per cent stake while Shendra Advisory Services Private Limited, a SPV, where Future Enterprises holds 49.82 per cent, has 48.98 per cent stake. Similarly, in FGILICL, the life insurance joint venture, Future holds 8.88 per cent stake directly and holds further stake in the company through the SPV Sprint Advisory Services Private Limited, and the rest is held by Generali Group. Future Enterprises holds a 49.81 per cent stake in Sprint Advisory Private Limited.

Meanwhile, Future Enterprises has received offers from potential buyers for its remaining 24.91 per cent interest in FGIICL, it said in its filing. It is also exploring options for the sale of its 33.3 per cent interest in the life insurance JV and expects to complete the exit of its holding in the insurance joint ventures in a time bound manner to meet its commitment under One Time Restructuring Plan implemented under August 6, 2020 circular issued by Reserve Bank of India in relation to Resolution Framework for Covid-19 related stress.

FEL has to pay lenders approximately Rs 2,000 crore which is due by March and the amount from this stake sale will be used to reduce its debt. Metta Capital Advisors acted as the financial advisors and Trilegal acted as the legal advisors to FEL for this transaction.

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