Liberty to raise stake in joint venture with Videocon to 49%

The Videocon group is set to sell a part of its stake in its general insurance joint venture (JV) with Liberty Mutual, which would see the US insurance giant raising its stake to 49 per cent, as per the new insurance regulations. Liberty holds 18 per cent in the company.

Videocon Group Chairman V N Dhoot said this was a part the group's plan to unlock value in some of its businesses, including insurance and energy investments across the world.

In the first quarter of 2015-16, Liberty Videocon earned Rs 80.5 crore as net premium, while for the 2014-15, it earned a net premium of Rs 192 crore.

UNLOCKING VALUE

• Earned net premium is Rs 192 cr in FY15
• Videocon owns 82% stake, Liberty owns 18%
• Videocon to dilute stake to 51%
• Liberty to raise stake to 49%  
• JV valued at Rs 8,000 cr
• Videocon to retire debt by selling stake

"We have many hidden jewels that would be monetised to make sure we remain committed to our banks and to our investors," said Dhoot, adding the stake sale proceeds would be used to retire the group's debt.

Videocon-Liberty would be the second-biggest transaction in the insurance sector after the AXA Group raised its stake in its two JVs with the Bharti Group, soon after the government allowed foreign companies to raise their stake to 49 per cent.

In May, the Foreign Investment Promotion Board had approved AXA Group's proposal in which AXA - which had 22.2 per cent stake in Bharti AXA General - paid Rs 431.4 crore for an additional 26.8-per cent stake, valuing the company at Rs 1,609 crore. Bharti Axa had a net earned premium of Rs 1203.8 crore for FY15.

Dhoot pegs the valuation of the venture with Liberty at Rs 8,000 crore, but sectoral analysts are hardly convinced since it is a relatively new player with a much lower premium income, considering the Bharti Axa deal size. Also, other bigger players like HDFC Life and ICICI Prudential Life Insurance have been valued at Rs 11,000 crore.

The group is also planning to divest from its real estate portfolio, mainly within India's top seven metros, valued at more than Rs 6,000 crore, and its portfolio of plants across Europe, China and Mexico at more than Rs 1,000 crore.

Videocon had a net debt of Rs 22,500 crore, and reserves and surplus of Rs 10,028 crore, according to its last audited balance sheet. Last year, it divested its Mozambique gas field for $2.48 billion in one of corporate India's most successful exits from an overseas venture.

On its direct-to-home (DTH) business, Dhoot said blue-chip funds in the US had lapped up the $325-million offering by the company, creating foreign direct investment inflow into India. Since the listing, response from investors was encouraging with share price of the DTH firm in Nasdaq going up by 25 per cent from the initial public offering price with the current market capitalisation of Rs 8,000 crore today. The DTH firm is looking to invest its cash reserves and internal accruals generated over the next five years to the tune of $1 billion (Rs 6,500 crore).