Future Generali to merge with L&T General Insurance

L&T to acquire 51% stake in merged entity

Future Generali India Insurance, the insurance arm of the Kishore Biyani-led Future Group, will merge itself with L&T General Insurance, a subsidiary of engineering and construction major Larsen and Toubro Ltd. Future Group and L&T have signed a non-binding agreement in this regard.  

At present, Future Generali is a joint venture between Future Group and Italy’s Generali in which the foreign partner holds a 26 per cent stake – the maximum allowed as per the existing foreign direct investment norms in the sector. Pantaloon Retail, a Future Group firm, holds around 50 per cent stake in the venture, while the rest is with a promoter group entity, Sprint Advisory Services.

After the merger, L&T will hold a 51 per cent stake and Future Group 23 per cent in the new entity, while the foreign partner will maintain its 26 per cent holding, according to the deal structure. Though the companies haven’t disclosed the transaction details, people close to the development say the deal size is estimated at Rs 600 crore.

The completion of the deal is subject to due diligence by both the parties, execution of mutually agreed definitive binding documents and requisite approvals from the Insurance Regulatory and Development Authority and other regulators, as well as related corporate bodies.

N  Sivaraman, president and whole-time director of L&T Finance Holdings, said it would be difficult to predict a timeline for the proposed merger. “We are committed to the insurance business. Once the deal is completed, purchase of shares would take place. Further, the issues related to personnel and human resources will be taken care of, after the deal closure,” he said. Sivaraman is responsible for and oversees L&T General Insurance among other group companies.

L&T General Insurance, which commenced operations in 2010, saw a 19.2 per cent growth in premium for the April-January period this financial year. It collected total premiums worth Rs 130 crore, compared with Rs 109 crore in the last corresponding period. Future Generali, on the other hand, saw a 21.3 per cent growth in premium for the April-January period. It collected premiums worth Rs 926 crore, against Rs 763 crore a year ago.

For the quarter ended December 31, Future Generali’s net loss widened to Rs 6.3 crore from Rs 3.5 crore in year-ago period. Similarly, L&T General Insurance saw a widening of loss for the quarter to Rs 24.6 crore, compared with Rs 17.8 crore loss in the last corresponding period.

Debt-hit Future Group had earlier said it planned to exit non-core operations and concentrate on the core retail business. Earlier this month, Pantaloon Retail had agreed to sell its 22.5 per cent stake in Future General India Life Insurance to Industrial Investment Trust Ltd. This deal was said to be valued at Rs 300 crore.