Sundaram Finance has agreed to buy its partner RSA Group’s 26 per cent stake in Royal Sundaram Alliance Insurance for ₹450 crore. Post completion of the deal, Sundaram Finance and its associates will fully own the insurance company. Sundaram Finance’s holding in it will increase to 75.90 per cent from 49.90 per cent.
TT Srinivasaraghavan, Managing Director, Sundaram Finance, said that the RSA Group of UK had recently undertaken a review of its businesses globally and decided to exit non-core markets, of which, India is one.
For the “large part there would not be major strategic shifts in business,” he added. Essentially, it will as always be a retail-oriented insurance company concentrating on areas such as motor, health and personal cover. “It is still early in the day to look at any major changes in style,” he said.
The deal was signed in Chennai on Wednesday with the “transaction contemplated as a one-shot payment” once the authorities clear the proposal. The funding will be through internal accruals, he said. RSA’s exit was planned for and does not leave a lacuna in the operations, he said.
The UK Group had bought in technical expertise in areas such as underwriting claims. But over the past 15 years, the local team has learnt the global best practices and can handle the business in-house. In a separate statement, RSA Group said the transaction was expected to result in a gain of about £16 million (₹150 crore) and an addition of about £19 million to the group’s tangible net assets.
Also read: Raising stake in non-life insurance venture augurs well for Sundaram Finance