Murugappa Yet To Finalise Insurance Venture Partner

The Chennai-based Murugappa Group is yet to finalise the investment partner for its proposed insurance foray. The Rs 3,900 crore group had applied for a general insurance license late last year and was proposing to start operations by April this year.

The R2 licence which the group was planning to obtain from the IRDA (Insurance Regulatory Development Authority) by December 2001 has also as a result got delayed.

The form IRDA/R2 includes detailed information on the manner of calculation of 26 percent equity capital held by a foreign company.

The other information that the company needs to provide include the geographic spread of offices, market research and analysis, products to be sold, distribution, sales promotion, underwriting, investments, information technology, customer service, retention limits and reinsurance, recruitment and training, internal controls, expenses of administration, new product pricing, information policy and premium rates.

With time running out the group has mandated the services of an investment banker to help it identify and start discussions with proposed investors.

It is also now understood that the Murugappa group may not be averse to going alone and subsequently off-load the stake to financial investors, a top official said.

M Anandan, managing director CIFCL (Cholamandalam Investment & Finance Company), said the group had appointed an investment banker to initiate discussions with potential financial investors. "Talks are currently being held. Even if there is a delay after finalising the partner because of procedural difficulties, the group is ready to contribute the entire equity capital of Rs 105 crore," he added.

As per the proposed plan, Tube Investments of India and (CIFCL)- both part of the Murugappa group, will hold 49 per cent and 17 per cent stake, respectively, in the insurance venture.

An, additional nine per cent of equity will be held by other group companies, though the exact break-up of ownership is yet to be known or made public. The balance equity 25 per cent will be picked up the investment partner.

The Murugappa group in November had submitted the R1 application (level-1 application for in-principle clearance) with the Insurance Regulatory and Development Authority (IRDA) for the general insurance licence.

Earlier, Tube Investments of India Ltd acquired 41.08 per cent stake (71.06 lakh shares) in CIFCL at a price of Rs 47 per share. TIL acquired these shares from different group companies, who were holding stake in CIFCL. Family members of the group in their individual capacity still hold 5 to 6 per cent in CIFCL.