IRDAI grants final approval to ICICI Lombard – Bharti AXA general insurance merger deal

The two companies had announced the proposed merger on August 21, 2021.

The in principle approval for the merger came from Insurance Regulatory and Development Authority of India (IRDAI) in November 2020 and now on September 3, 2021, Lombard informed about the receipt of the final approval from the regulator.

Key points to note –

  • The appointed date for the scheme was April 1, 2020. The demerger of the non life business from Bharti AXA (BA) and transfer to ICICI Lombard (IL) shall be effective within 3 days from the date of final approval.
  • It’s an all stock deal and the shareholders of BA shall receive two shares of IL for every 115 shares of BA held by them. BA is owned 51% by Bharti Enterprises (promoter holding company of Bharti group) and 49% by AXA. Post merger BA will hold 7.3% stake in IL. This would also mean that ICICI Bank’s stake in IL will fall below 50%. Pre merger ICICI bank held 51.87% stake in IL.
  • Reason for merger – BA will help IL to expand the distribution network. E.g., adds 6700 field agents, 40 bancassurance partnerships and expansion into Karnataka and Telangana. The combined entity would have an expected market share of 8.7% as against 7.8% of IL individually. IL anyways was the largest private non insurer before (3rd largest overall)  and the deal would further strengthen the same.
  • For Bharti it seems a continued decluttering of their diversified business portfolio and hence increased focused on their core business i.e., telecom and digital that would increasingly need more funding.

Deal is a further indication of continued consolidation in the overall Indian Insurance sector and the same is expected to continue.

Bigger will keep getting bigger and the smaller will increasingly give up.

Intermittently though, technology led disruptors will keep coming and many shall end up being aggregator distributors !

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