Bharti-AXA General is likely to merge with ICICI Lombard in a Rs 2,600 crore, all-stock transaction. The two firms are in talks for a merger deal, which is expected to be sealed soon.
The valuation of Bharti-AXA has been pegged at Rs 2,600-2,800 crore, people with knowledge of the transaction said, requesting anonymity. Emails and messages to ICICI Lombard did not elicit any response till the time of publishing this report. Bharti Enterprises, the majority shareholder in the joint venture with AXA group, declined to comment. AXA, the French insurance and asset management major, which holds a 49 per cent stake in the company, may exit the general insurance business once the deal goes through. The proposed merger will go through only if the requisite regulatory approvals are received, failing which the deal may not happen.
Bharti-AXA General Insurance’s gross direct premium underwritten in the first quarter of financial year 2020-21 amounted to Rs 508.92 crore, a decline of 12 per cent compared the same period last year. However, its collections grew 3 per cent for the month of June 2020, compared with the year-ago period. The company recently bagged a Rs 800-crore crop insurance mandate from the state governments of Maharashtra and Karnataka to insure their farmers under the Pradhan Mantri Fasal Bima Yojana (PMFBY).
ICICI Lombard, one among the three listed general insurance companies, commands a market share of 8.4 per cent, as per the June 2020 figures released by the Insurance Regulatory and Development Authority of India (IRDAI). It reported a 29 per cent rise in net profit in the June quarter (Q1FY2020), but saw its gross premium collections dip 5.3 per cent compared to the same quarter last year. Its ex-crop business was up 6 per cent in June 2020 compared to the same period last fiscal. This was on the back of growth in fire (up 34 per cent), motor (up 8 per cent) and retail health (up 43 per cent) covers, a Kotak Institutional Equities report said. The company’s market capitalisation at close of business on Tuesday stood at Rs 59,945 crore. Its shares closed at Rs 1319 on the BSE on Tuesday, up 1.15 per cent.
General insurance companies saw a 6 per cent drop in premium collections in the COVID-19-affected first quarter, but analysts point to some green shoots too. “Excluding crop, general insurers reported an 8 per cent year-on-year growth in premiums in June 2020, led by 47 per cent y-o-y growth in fire, 9 per cent y-o-y growth in health and revival in motor premium to 1 per cent y-o-y from 23-49 per cent decline over the past two months,” the report said. Retail health, in particular, has shown strong growth of 43 per cent on the back of COVID-19-induced panic, prompting individuals to buy health insurance policies. The private sector registered a 41 per cent increase in premium collections in this segment during the first quarter of FY 2020-21. Standalone health insurers reported a 46 per cent rise in the health segment, led by a 61 per cent increase in the retail health business, while state-owned general insurers reported an 18 per cent growth in this segment, the Kotak Institutional Equities report noted.
Late on Wednesday, ICICI Lombard issued a statement. "Our company explores and evaluates various opportunities from time to time, as and when considered appropriate...at present, no decision has been taken by our board or committee of directors which calls for dissemination or disclosure under the listing regulations. We are therefore unable to comment on the captioned article," ICICI Lombard said in response to Bombay Stock Exchange's (BSE) query seeking clarification on the likely deal.