Aditya Birla Capital sells insurance broking arm to Samara for ₹455 crore

The board of Aditya Birla Capital on Monday approved the sale of its entire stake in Aditya Birla Insurance Brokers Limited (ABIBL) to Edme Services Pvt Ltd, an entity owned by Samara Capital Group and an affiliate of Samara Alternate Investment Fund, for ₹455 crore.

As part of the deal, Aditya Birla Capital will sell its entire 25,65,103 equity shares, representing 50% of the share capital of ABIBL to Edme Services, according to its stock exchange filing.

"The execution of a share purchase agreement (SPA) between Aditya Birla Capital, ABIBL, Infocyber India Pvt Ltd, the other shareholder of ABIBL, and the purchaser, for sale of entire 100% of the issued and paid-up share capital of ABIBL to the purchaser, including 25,64,897 equity shares of Rs. 10/- each held by Infocyber, representing the balance 49.998% of the issued and paid-up share capital of ABIBL, at an enterprise value of Rs. 4,550,000,000 (Rupees Four Thousand Five Hundred and Fifty Million) on a cash free and debt free basis, and subject to closing adjustments on the terms set out in the SPA," the filing said.

Further, under the share purchase agreement (SPA), the company and Infocyber (the other shareholder) may receive an additional consideration after completion of five years from the closing which is conditional upon the fulfilment of certain conditions under the SPA.

The deal is subject to the approval of Insurance Regulatory and Development Authority of India (IRDAI) and other regulatory approvals. The transaction is expected to be completed within 120 to 180 days from the execution of the SPA.

ABIBL specialises in providing integrated insurance broking and advisory services to companies and individuals by way of retail and corporate solutions. ABIBL also offers re-insurance solutions to insurance companies.

Reacting to the development, shares of Aditya Birla Capital rose as much as 1% to ₹149.10 on the National Stock Exchange (NSE).

ABIBL's FY22 revenue stood at ₹684 crore and profit after tax (PAT) at ₹64.85 crore.

According to Moody's, Indian insurers' premium revenue is growing rapidly thanks to robust post-pandemic economic recovery, led by strong demand for health and protection products. "We expect premium growth and better underwriting discipline in India's dominant state-owned insurance sector to relieve profitability pressure on both the life and general insurance sectors, arising from rising claims and reinsurance costs," the ratings agency said in January.

In line with global trends, Indian general insurers' claim expenses have risen in recent months due to inflation and a return to normal claims volumes after a pandemic-related decline, Moody's said.

This, combined with higher reinsurance costs as global reinsurers seek to recoup hefty catastrophe losses globally, and increasing natural loss events in India in recent years, is putting pressure on their profitability, it added.

Rising claims pushed Indian general insurers' average net loss ratio (claims as a percentage of premiums) up to 89% for FY 2021, Moody's said. The previous year, it had fallen to 81% from 86% in 2019, as pandemic-related restrictions led to a drop in claims volumes.