Gujarat Ambuja to buy 14.87% in ING Vysya

Gujarat Ambuja Cements will execute the first buy-out in the private insurance industry by acquiring 14.87 per cent stake in ING Vysya Life Insurance Company.

The cement major will buy out ING Vysya Bank's entire holding in the insurance entity at Rs 60.9 crore. At thjs price, the insurance entity is valued at Rs 409.55 crore.

The buyout is subject to the approval of the Insurance Regulatory and Development Authority (IRDA). The foreign parent ING will continue to hold 26 per cent stake in the insurance outfit, South-based GMR Group holding 49.13 per cent and Enam holding 10 per cent.

"Our decision to invest in ING Vysya Life was based on its rapid expansion and our belief that the company will continue to build on this growth, tapping the global expertise of ING Group's sizeable insurance operations, " said Anil Singhvi, whole time director of Gujarat Ambuja Cements.

With the proposed sale, ING Vysya Bank would make a one-off gain of Rs 22.90 crore the bank informed informed the Bombay Stock Exchange today. ING Vysya Bank, however, will continue to distribute ING Vysya Life Insurance products through its network of 400 plus bank branches across the country.

There will be no change in the name of the life company despite there being no stake holding by the bank, confirmed company officials.

Gujarat Ambuja will take one seat to join the current nine-member board of directors of ING Vysya Life. The insurance company today has a capital base of Rs 390 crore, with the last induction of capital having taken place in January this year.

Sources close to the development told Business Standard that the change in the shareholding structure was a fallout of the insurance entity breaching IRDA norms and the Reserve Bank of India having inquired about the loss-making activities of the bank.

In addition to the insurance company reporting losses, the private sector bank reported a net loss of Rs 38.18 crore for fiscal 2005.

The IRDA had indicated in a letter to the private life insurance entity that the foreign equity holding in ING Vysya Life is in breach of the 26 per cent cap on account of holdings of non resident Indians and overseas corporate bodies in GMR Industries Ltd.

ING Vysya Bank had brought down its holding from the previous 49 per cent to 20 per cent.

Its stake further fell to 14.87 per cent when it decided to cap its exposure at Rs 58 crore last year by not subscribing to fresh capital in the life insurance entity. The balance stake was picked up by Enam and GMR Group.

Today's announcement comes at a time when ING Vysya Life is experiencing rapid growth with premium income having risen by 312 per cent in 2004.