A big deal gone bad. The acquisition of Bharti’s 74% shareholding in Bharti AXA by Reliance Industries Ltd (RIL) that would have made Mukesh Ambani compete directly with his younger brother Anil Ambani in insurance business has fallen through.
While this puts the entry of Mukesh Ambani in the insurance business at a standstill, it prevents Sunil Mittal from exiting an unrelated business and deploy the funds into his mainstay telecom, following the acquisition of the $10.7 billion Africa-based Zain.
RIL and Bharti Enterprises on Friday announced that they have mutually agreed to terminate their negotiations on the proposed acquisition by RIL and its associate Reliance Industrial Infrastructure Ltd (RIIL) of Bharti’s shareholding in Bharti AXA Life Insurance and Bharti AXA General Insurance.
In June, the two groups announced the proposed acquisition. If the acquisition had gone through, then Bharti would have got an exit from the insurance business. The group’s focus is currently telecom where it is struggling in Africa.
In a statement, RIL said the talks were terminated as parties had failed to “reach agreement on long-term vision and joint governance of the ventures”.
“Bharti AXA Life Insurance and Bharti AXA General Insurance will continue to develop their operations in India, as they have successfully done over the past years, and build a sustainable and long-term business by tapping the significant growth potential offered by the Indian market,” said Bharti.
In June, when the deal was announced Bharti had said, “Currently, the financial services ventures do not fit into Bharti’s long-term growth plans. Bharti intends to use the proceeds from selling off its interests in these joint ventures towards other group businesses in India and abroad.” Now, Bharti will have to continue with this joint venture until it finds another buyer.
Several insurance majors are looking to rope in a third joint venture partner to enhance distribution network while boosting finances for their operations in the cash starved sector. The ULIP guidelines have mandated companies to offer guaranteed return of 4.5% on all unit linked pension products.