Kotak Mahindra Bank, Hero FinCorp and True North in race for Future’s stake in general insurance JV

Retail billionaire Kishore Biyani-backed Future Group, which is saddled with high promoter level debt, has launched preliminary talks with a clutch of strategic and private equity investors to sell its stake in its general insurance joint venture with Italy’s Generali Group, people familiar with the matter told Moneycontrol.

Mumbai-headquartered Future, India’s largest retail firm, holds a 50 percent stake in Future Generali India Insurance, which commenced operations in 2007.

“Future Group has reached out to India-focused private equity firm True North, Hero FinCorp, Kotak Mahindra Bank, among others,” one of the persons told Moneycontrol. Future Group has named investment bank UBS to find a buyer for the proposed stake sale.

A second person said discussions have picked up pace in recent weeks and Future Group expects to raise $300-350 million through the deal. Another person said Future Generali India Insurance was a “good, well-built platform that has been around for 12-13 years” and would therefore attract interest from bidders.

A fourth individual privy to the negotiations said Future Generali is among the top 10-11 players insurance in India and is reasonably sized. “True North is bullish on the domestic insurance sector and has been on the prowl for more bets in this space after it struck the Max Bupa deal. The Hero Group has attempted acquisitions in this segment earlier, but those deal talks didn’t fructify and it continues to be interested in the segment,” he said.

Explaining the deal rationale for Kotak Mahindra Bank, this person said they (Kotak) are a late entrant in the general insurance and a small player. “They can achieve size and scale through this deal.”

All the four persons spoke to Moneycontrol on the condition of anonymity.

In response to an email query from Moneycontrol, Future Group and UBS declined to comment. “We have no comments to offer,” said Rohit Rao, Chief Communication Officer, Kotak Mahindra Group. True North was unavailable for comment. When contacted, Abhimanyu Munjal, Joint MD and CEO, Hero FinCorp said, “We don’t want to comment on market speculation.”

Future Group promoter entities had a total debt of Rs 11,970 crore, with total pledged shares estimated at over 90 percent by value across the group, according to media reports.

Future Generali India Insurance is present in more than 125 locations across India, has 3,000 active corporate clients and has sold more than 82 lakh policies. The firm manages assets worth Rs 3,629 crore as of March last year. It has products ranging from health insurance, personal accident, travel insurance, motor insurance, home insurance and others.

In 2018, Generali Group said it has signed an agreement with Future Group to increase its stake in its insurance ventures in India to 49 percent from 25.5 percent after investing $130 million.

Khushroo Panthaky, Director, Grant Thornton Advisory Pvt, feels the next few months could determine the extent of opportunity that the coronavirus pandemic could spell for these firms. "In the post COVID-19 era, on account of increased costs of reinsurance and a high incidence of claims on the health side, general and health insurance companies will enhance premium for individual and group health insurance policies. General insurance companies will start offering comprehensive health insurance and other covers, given that group health insurance could be made mandatory for all business and government establishments. The next six months could determine the extent to which this pandemic could turn into an opportunity for these insurance players," he explained.

In February 2019, True North purchased a 50 percent stake in Max Bupa from Max India for Rs 510 crore. Max Bupa is a joint venture between Max India and UK-based healthcare services firm Bupa. True North (formerly known as India Value Fund Advisors — IVFA) was established in 1999 with a focus on investing in mid-sized India centric businesses. It has pumped in around $1.5 billion across 30-plus businesses, according to its website. Its existing portfolio includes companies such as Zydus Wellness, Meru Cabs, DM Healthcare, KIMS Hospitals, Magma Fincorp, among others.

Delhi-headquartered NBFC Hero FinCorp offers two-wheeler loans, used car loans, loan against property, corporate and SME loans. According to media reports, in September 2019, the Anil Ambani Group called off the proposed sale of its general insurance business to Hero FinCorp after advanced negotiations.