The state-owned Bank of Baroda and Andhra Bank have entered into an agreement with the UK-based wealth and investment company Legal & General Group to form a joint venture for a foray into the insurance business with an initial equity capital of Rs 200 core.
Under the agreement, Bank of Baroda would be the lead partner with 44 per cent stake, Andhra Bank would have 30 per cent and Legal & General would hold the remainder in the joint venture.
Legal and General Group has a market value of about Rs 64,000 crore (8 billion sterling pounds).
Talking to Hindustan times, A.L. Khandelwal, CMD of Bank of Baroda, said that the foreign partner had paid a good premium for acquiring the 26 per cent stake. He, however, refused to divulge the actual premium. The net worth of the joint venture would be much more than Rs 200 crore, he added.
Most Indian players such as State Bank of India, Kotak Mahindra Bank and Bajaj Auto have asked their foreign partners to pay a premium for entering the Indian market. Sources in the joint venture said that Legal & General had paid a preium of over Rs 40 per share. “The new venture gets a head start since it is going to leverage the existing network of Bank of Baroda and Andhra Bank,” they added.
There are around 18 players in the life insurance sector, with the latest being retail firm Future Group.
Tim Breedon, group CEO, Legal & General, India: “Our focus would be bancassurance and with the huge networks of these two banks we are confident of becoming a significant players within two years of operations.”