Allianz to hike stake in insurance venture with Bajaj

Bajaj and Allianz seem to have called a truce. After much debate on the issue, Bajaj is finally on board and will allow Allianz to hike its stake according to the pre-fixed agreement at the time of the company's inception. This would be exercised only when the regulations permit.

Here is a verbatim transcript of Avni Raja’s report on CNBC-TV18. Also watch the accompanying video.

According to the agreement, Allianz can increase its stake in the life insurance business upto 74% at a pre-fixed price as well as in the non life insurance business upto 50%. Bajaj is to get 16% assured return from this. The entire capital has been brought in by Allianz.

Earlier Bajaj did not want Allianz to hike it at the pre-determined price because the current valuations are much higher. So they felt they would be getting an unfair deal. But now Bajaj seems to have come on board. The pre-fixed agreement is only till 2016. So if the government allows the foreign direct investment (FDI) hike after 2016, then Allianz will have to pay according to the market price to increase its stake.

Sanjeev Bajaj, Managing Director of Bajaj Finserv, said, “It is in Allianz's interest, and we believe that they will call their option as and when allowed. We have an agreement which is as per government regulations and we are fully committed to going as per that. So I don't see any tussle there. The agreement has a number of issues but largely we will go as per the agreement.”