Bajaj Finserv may break ties with Allianz in H1CY25, possibly as soon as March-end

Bajaj Finserv may break ties with Allianz in H1CY25, possibly as soon as March-end

A near 25-year-old association between Sanjiv Bajaj-led Bajaj Finserv and Munich-headquartered insurance giant Allianz SE is likely to be terminated by March this year. According to highly placed sources aware of the development, FY25 may be the last year of operations for the joint venture between Bajaj Finserv and Allianz, which is present in the life and general insurance sectors.

Differences over the future direction of the alliance is said to be the reason for Allianz terminating the pact with Bajaj Finserv. Bajaj Finserv holds 74 percent stake in both the insurance entities – namely Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company, while Allianz’s holds the remaining 26 percent. Allianz is said to have been eager to raise its stake while Bajaj was firm in retaining majority control. Differences on this issue are said to be the main reason for the seemingly impending end of the alliance.

Valuations under discussion

“What should be the terminal valuation of Allianz’s stake and how Bajaj Finserv should buy out the German insurer’s stake from the JV are under consideration,” said a person aware of the discussions between India’s leading financial services company and Europe’s largest financial services conglomerate. These details are expected to emerge by end of January. “Once these terms are agreed upon, it would just be about formalising the exit,” he added, stating that both entities at present are vying for dismantling the joint venture by March 31, 2025 or latest by end of June FY26 quarter.

Being unlisted entities, valuations of both insurance arms are not available in public domain. However, equity analysts peg Bajaj Allianz Life Insurance’s embedded value at Rs 56,000 – 59,000 crore which converts to Rs 300 – 330 per share. The potential market value of Bajaj Allianz General Insurance is seen at around Rs 56,000 – 60,000 crore or Rs 400 – 450 per share. It is understood that the exit multiples due to Allianz may not be very different from these numbers.

Email sent to Bajaj Finserv remained unanswered till publishing the article.

“As a successful foreign investor in Property-Casualty insurance in India, Allianz intends to further strengthen its position. Allianz considers India to be one of the most important countries to grow and to develop in over the next few years. Please understand that we do not comment on market rumours”, an official spokesperson for Allianz replied over an email.

Reasons for split

People aware of the matter say differences between Allianz and Bajaj Finserv dates back to 2014. “Allianz has been keen to increase its shareholding in the JV since then, but Bajaj wasn’t keen to reduce its stake even to the absolute majority stake of 51 percent. The group has never been ready to go below 74 per cent holding in either insurance businesses because they were of the view that since they are primarily responsible for operations, distribution and overall business, they should hold the maximum stake,” said one of the sources cited.

Also, when Allianz entered the joint venture with Bajaj Finserv, the foreign direct investment laws for the insurance sector was quite restrictive. Subsequently, even as the law was amended to allowed foreign entities hold more stake in Indian insurance outfits, sources say Bajaj Finserv wasn’t amenable to changing its shareholding in line with these amendments.

“Now, with FDI increased to 74 per cent, Allianz wants a meatier play in the Indian insurance sector which is not happening under the existing structure with Bajaj Finserv,” said a banker while explaining the rationale for the split in the JV.

Further, amendments brought to insurance norms in 2020 stated that if a foreign entity exited its operations in India, it cannot re-enter the country for at least two years from the date of exit. This restriction was lifted on May 15, 2024, paving way for Allianz to tie up with another domestic investor, even if it should terminate its JV with Bajaj Finserv.