Sundaram Fin divestment hits regulatory hurdle

Sundaram Finance Ltd, the majority stakeholder in Chennai-based general insurance company Royal Sundaram Alliance Insurance Company, said it had not recorded any progress in its proposed divestment, owing to regulatory concerns. Reports had earlier surfaced that Anil Ambani-promoted Reliance General Insurance had proposed to take over Royal Sundaram.

Managing Director T T Srinivasaraghavan said the company had received inquiries about its continuance in the general insurance business and its investment in Royal Sundaram. He said the company had held preliminary discussions regarding a potential divestment, but that no progress had been made, since new regulations mergers and acquisitions were not yet clear.

When asked whether the company was planning to merge with Reliance, Srinivasaraghavan declined to comment.

Senior Insurance Regulatory and Development Authority (Irda) officials said this was the first time that the takeover proposal of a general insurance company had reached the regulator.

Royal Sundaram Alliance is a joint venture between Sundaram Finance and RSA Insurance, in which Sundaram Finance holds 74 per cent equity stake. Royal Sundaram was the first private non-life insurance company to secure a licence to operate in India, according to a company statement.

The company had posted growth of 25 per cent in its total premium collections at Rs 1,147.09 crore in 2011, compared with Rs 915.56 crore in 2010. In March, Irda had announced a steep rise in third-party motor pool losses. The company thus made a higher provision of Rs 75.81 crore for the year, against Rs 17.67 crore in the previous year.

Recently Royal Sundaram had infused Rs 65 crore of additional capital (including premium), taking the total paid-up capital and premium to Rs 275 crore.