M Pallonji Group, True North’s Sehgal seek IRDAI nod for general insurance venture

If the application is approved by the Insurance Regulatory and Development Authority of India (IRDAI), M Pallonji Group will hold a majority stake of 51%, with additional investments from Federal Bank and several family offices.

The group’s promoters, Mehli Mistry and Pheroze Mistry, are cousins of the Shapoorji Mistry family. Mehli Mistry also serves as a trustee on Tata Trusts. The group has appointed Aditya Sharma, chief distribution officer at Bajaj Allianz General Insurance, as CEO of its proposed general insurance venture.

The group did not respond to ET’s request for comment, while Sehgal declined to comment.

Sehgal is investing in his personal capacity, besides drawing firm commitments from a couple of other family offices.

The venture, currently in the initial regulatory stages, will undergo IRDAI’s R1, R2, and R3 approval process. The R1 stage evaluates business projections, board approvals, and financial commitments, while R2 defines share capital requirements. R3 is the final approval. The company is expected to launch with an initial investment of ₹200 crore, backed by six investors, according to one of the sources.M Pallonji Group has prior experience in the insurance sector as a long-term investor in PNB MetLife, where it holds nearly a 20% stake. The group intends to exit this investment only during an IPO. As of September 30, 2024, MetLife increased its stake in PNB MetLife to 48.91%, while PNB holds 30%. The remaining shares are divided among other investors, including M Pallonji Group.

This marks a rare instance of an Indian conglomerate taking a majority stake in a general insurance venture, in contrast to recent entrants that have primarily been foreign investors or private equity firms. M Pallonji Group’s businesses span various sectors, including painting, dredging, stevedoring, logistics, shipping, finance, investments, life insurance, automobile dealerships, and the manufacturing of speciality coatings.

The general insurance industry has been growing in double digits over the past several years. In FY24, it expanded by 15.5% year-on-year, with the gross direct premium income (GDPI) reaching ₹2.79 lakh crore. ICRA projects the sector to grow by 32% to ₹3.7 lakh crore by FY26.

Over the last decade, corporate-backed entrants in the insurance sector have been limited, with most recent approvals granted to private equity-led ventures such as GoDigit (backed by Fairfax) and Acko General Insurance. Kshema General Insurance, launched in recent years, focuses on crop insurance.

IRDAI chairman Debasish Panda has emphasised the need for greater corporate participation to improve insurance penetration, which currently stands at just 1% of GDP.

In the February budget, Finance Minister Nirmala Sitharaman announced an increase in the foreign direct investment cap in the insurance sector from 74% to 100% to support long-term capital inflows.

The industry currently comprises 26 life insurers, 27 general insurers, seven standalone health insurers, one domestic reinsurer and 13 foreign reinsurers. It has grown at a 10% compounded annual growth rate (CAGR) over the past five years. In FY24, total premiums reached ₹11.23 lakh crore, with assets under management at ₹67.57 lakh crore. Insurance penetration was at 3.7%, and density at $95 – both significantly below the global averages of 7% and $889, respectively.