Irda approves revised PNB-MetLife deal

Shareholders to pare stake in MetLife

The Insurance Regulatory and Development Authority (Irda) has approved Punjab National Bank’s (PNB) plan to acquire a 30 per cent stake in MetLife India Insurance.

The transaction had been awaiting the regulator’s approval for more than a year. Irda was not comfortable with the deal structure and had directed the insurance company to re-work the sale agreement. Under the revised structure, the shareholders of MetLife India will sell part of their stake to the state-run bank. This will ensure the equity capital base is not increased, leaving MetLife’s key efficiency ratios unchanged.

The previous proposal envisaged fresh share issues to the existing shareholders and government-owned PNB acquiring 30 per cent stake in the expanded equity base for a nominal Rs 1. The regulator’s apprehension stemmed from the fact that while a new player was entering, the sector was not benefiting, as fresh funds weren’t coming in.

MetLife India Insurance is a joint venture between Jammu & Kashmir Bank, the M Pallonji Group, the US-based MetLife International and some private investors. MetLife International has 26 per cent stake, the maximum foreign shareholding allowed in an Indian insurance joint venture. Domestic shareholders have the remaining 74 per cent stake.

“The board approved the proposal for inducting Punjab National Bank as a shareholder, subject to certain conditions on appointment of directors on the board of the insurer by Punjab National Bank,” Irda, which approved the proposal in its 73rd board meeting, said in a statement. It said the conditions included the insurer maintaining its solvency margin in line with Irda’s directions.

PNB’s initial proposal was approved by the Reserve Bank of India. However, Irda said the deal was not consistent with Indian accounting standards and had also questioned the valuation. It did not offer details on the revised valuation. PNB and MetLife India Insurance officials also declined to comment.

The Irda board also considered broadening the definition of ‘Indian Promoter’ to include a limited liability partnership (LLP). “Such an LLP can, however, neither be a foreign LLP nor should any of the partners in the LLP be foreign entities,” Irda said.