HSBC forays into insurance JV with Canara, OBC
While Canara will own the majority 51%, OBC will hold 23% and HSBC 26% in the deal, reports Arun Kumar.india Updated:
Global banking group HSBC, aiming to jumpstart a late entry into the country's hot insurance market, on Monday unveiled a joint venture with state-run Canara Bank and Oriental Bank of Commerce (OBC), to enter which it would pay a hefty premium of Rs. 125 crore, or about 240 per cent, over its partners who will get the share at par.
Canara Bank will own the majority of 51 per cent, while OBC will hold 23 per cent and HSBC 26 per cent in the venture.
The joint venture will have a paid-up capital of Rs 200 crore and a net worth of Rs 325 crore. Under the agreement, HSBC will pay Rs 177 crore for its 26 per cent at the rate of Rs 34 per share including a premium of Rs 24 per share. Canara bank will pay Rs 102 crore for its 51 per cent equity and OBC will infuse Rs 46 crore for 23 per cent.
"HSBC’s intent to pay a premium of Rs 125 crore clearly reflects that the opportunities that India offers in the insurance sector," said the chief executive of one of private insurance company.
HSBC will join Old Mutual of South Africa, Cardiff of France and Allianz of Germany, which also paid premia for venturing into the Indian insurance market.
Speaking at the launch Finance Minister P Chidambaram underlined the opportunity by focusing on the unmet needs.
“Eighty per cent of Indians do not have any access to insurance product- not home, not fire, not riot, not theft. In fact, insurance products are unknown to millions of people in the country," he said.
As a result of this joint venture, which is expected to be launched by the end of 2007, some of the existing players such as Aviva, Life Insurance Corp (LIC) and Tata AIG may lose one of their bank assurance partners.
OBC currently sells LIC products, while Canara sells policies from Aviva, while HSBC's own network sells Tata AIG products.
"After the formalisation of the joint venture, Canara Bank and OBC will sell products only from this venture," said the chairman of one of the banks, who did not want to be identified.
Speaking on the occasion, Canara Bank Chairman and Managing Director MBN Rao said, “The new company will have exclusive access to customer bases of both the state-owned banks, Canara Bank and OBC ,and HSBC, in India."
KN Prithviraj, chairman and managing director of OBC, said that the JV would help in offering customized solutions to the customers and enhance shareholder value.
First Published: Mar 05, 2007 21:28 IST