Bajaj Finserv stake buyout: Bajaj Finserv to split Allianz stake buyout to comply with IRDAI rules

Mumbai: Bajaj Finserv structured its ₹24,180-crore buyout of Allianz SE’s stake in its insurance ventures by acquiring just 1.01% at the company level, while the remaining stake is being purchased by its promoter entities to comply with the regulations laid down by Insurance Regulatory and Development Authority (IRDAI). Bajaj Finserv will acquire 1.01% in each firm, while Bajaj Holdings & Investment and Jamnalal Sons will pick up the remaining stake.

Bajaj Finserv structured the deal to comply with insurance regulations barring stake acquisitions via borrowed funds, the company said during a investor call post announcing the deal. Under the plan, Bajaj Finserv will raise its stake to 75.01% with a 1.01% purchase, while Bajaj Holdings & Investment will acquire 19.95% and Jamnalal Sons 5.04%. The ₹24,180 crore payout to Allianz for 26% values Bajaj Allianz General Insurance at ₹53,000 crore and Bajaj Allianz Life at ₹40,000 crore.

“The management highlighted that the deal will be self-funded, in line with regulatory requirements,” said JM Financial in its report post the investor call. “While Irdai has asked the larger insurers to propose a glide path to listing, post this transaction, BALIC and BAGIC will first rebrand themselves, before considering an IPO.”

The deal, expected to close in 15 months, gives Bajaj full control over its insurance businesses, allowing it to pursue new categories and inorganic growth. Also management will look into comprehensive licence for the two companies, once the insurance amendment legislation, the management informed analysts.

IRDAI has sought a glide path for large insurers to go public, but Bajaj will revisit listing after 2-3 years once the transition is complete.

“As Bajaj Finserv will acquire only 1.01% stake, the payment of ₹940 crore can be managed from internal accruals and some bridge loans,” said Avinash Singh of Emkay Global, “The major funding arrangements will be required at Bajaj Holdings and Investments that need to pay Allianz ₹18,500 crore which will be meet its funding needs from its internal treasury assets liquidation.”Ever since the RBI FEMA regulations came as a hindrance in execution of Allianz increasing its stake n the insurance JVs, the future of Allianz in this partnership was always doubtful, and this has been a long-pending overhang on Bajaj Finserv.Meanwhile, Allianz is exploring new partnerships with Jio, as reported. For Allianz, once 6.1% of it’s stake is transferred and it is no longer classified as a promoter, Allianz will be free to make its strategic decisions in India.

With regulatory approvals from Irdai and the Competition Commission of India (CCI) pending, Bajaj does not expect major due diligence hurdles given its existing promoter status.