Mitsui Sumitomo to increase stake in Chola MS to 40 per cent

Murugappa Group firm Tube Investments of India (TII) would divest 14 per cent shareholding in Cholamandalam MS General Insurance Company to its Japanese joint venture partner, Mitsui Sumitomo Insurance (MSI) for Rs 882.7 crore.

With the deal, the company valuation stands at Rs6,304.78 crore, putting it among top three valued companies in the general insurance sector on the basis of whatever public valuation details were available.

With the completion of the transaction, MSI would have 40 per cent stake and TII would hold a 60 per cent stake in the JV company.

Currently, ICICI Lombard is the highest valued general insurance company in the country.

This had been approved by the TII board of directors yesterday, subject to regulatory approvals. The board approved the divestment of 418,32,798 equity shares of a Rs10 face value each, for Rs211 a share. TII and MSI had exchanged the necessary letters of offer and acceptance.

Chola MS, a subsidiary of TII, has total revenue of Rs 1,779 crore during 2014-15.

Several foreign insurance companies had hiked stakes in their respective JVs in India in the recent past, after the central government increased the cap in this regard from 26 per cent to 49 per cent.

For instance, France-based AXA SA had upped its stake in the life insurance and general insurance JVs with Bharti Enterprises, Japanese firm Nippon Life had announced its decision to increase its stake in Reliance Life Insurance while Aegon had increased stake in Aegon Life Insurance, a joint venture with Bennett, Coleman & Company to 49 per cent.

Tube Investments decided to divest 41.8 million equity shares of Rs10 each in favour of its joint venture partner for Rs211 per share amounting to Rs882.67 crore.

MM Murugappan, TI chairman, said this would further strengthen relations with Mitsui Sumitomo.