Debt-laden Future Enterprises has signed twin deals with Generali Group to offload its stake in the general insurance and life insurance joint ventures between the two. Generali already holds 49% stake in both insurers.

Notably, the Parliament had passed the Insurance Amendment Bill 2021 in March last year that increased the cap on foreign direct investment (FDI) in insurance sector to 74% from the earlier limit of 49%.

Future Enterprises (FEL) will offload only a portion of its shareholding in Future Generali India Insurance Company Limited (FGIICL), with Generali given a call option for the remaining stake. The Indian conglomerate will sell its entire stake in Future Generali India Life Insurance Company Limited (FGILICL) to Generali.

Under the deal, the Kishore Biyani-led FEL will sell 25% of stake in the general insurance JV for a cash consideration of ₹1,252.96 crore, along with an additional consideration that is linked to the date of the closing of the transaction. The stake sale will bring Generali’s total shareholding in the JV to around 74%, the permitted FDI limit in insurance sector. Future’s stake in general insurer will come down to 24.91% from the current 49.91% after the disinvestment.

Generali has also acquired an option to buy out the Company’s remaining interest in FGIICL, directly or through a nominee, at an agreed valuation subject to applicable regulatory approvals, the company further stated.

Generali has also offered to buy out Future‘s stake in FGILICL, making it the majority stakeholder in the company. Generali had earlier received approval from the Competition Commission of India (CCI) to purchase 16% stake held by Industrial Investment Trust Limited in the life insurance joint venture. It has also agreed to invest up to ₹330 crore in tranches in FGILICL to fund its growth plans.

“Generali will subscribe to a preferential allotment of shares in FGIL. As a result, following the closing of the transaction and completion of the preferential allotment, Generali will hold a stake of around 68% in FGIL, which may increase further to 71% by the end of 2022, following further preferential allotment of shares,” the Italian insurer said in a statement.

Pursuant to these transactions, Generali will acquire a majority stake and control in both insurance joint ventures, Future stated. No new shares are being issued to Future Enterprises, the company clarified regarding both transactions.

“As a consequence, subject to receipt of applicable regulatory approvals, and other conditions precedent, Generali will, inter alia, have increased board nomination rights, information rights, etc.,” Future told the stock exchanges in a filing late on Wednesday.

Potential buyers have also approached Future for its remaining 24.91% interest in FGIICL, the company said in its filing. It is also exploring options for the sale of its 33.3% interest in the life insurance JV and expects to complete the exit of its holding in the insurance joint ventures in a time bound manner to meet its commitment in accordance to one-time restructuring plan implemented by Reserve Bank of India in view of Covid-19-related stress.

Metta Capital Advisors acted as the Financial Advisors and Trilegal acted as the Legal Advisors to FEL for this transaction. Citigroup and Alvarez & Marsal acted as financial advisors to Generali.

By the end of financial year ending March 31, 2021, FGIICL reported around ₹3,799 crore premiums, while the same for FGILICL reported approximately ₹1,266 crore premiums.

Following the completion of all the components of the transaction, the total estimated impact on the group’s regulatory solvency ratio will be approximately (-)4 p.p. in 2022, Generali said.

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