Mumbai: India’s Reliance Capital, which plans an IPO for its life insurance business, intends to bring a strategic investor into the unit ahead of its listing, the company’s chief executive told Reuters on Wednesday.
Sam Ghosh said the group wants to bring in a foreign insurance company, possibly alongside financial investors, to buy a roughly 10% stake in the life insurance unit ahead of a listing to sell another 10%, which still needs regulatory approval.
Reliance Life Insurance, which is aiming to reach break-even in the next fiscal year, managed about $2.15 billion in assets as of September, a figure it aims to increase to about $8.6 billion by 2013.
Ghosh said Reliance Life, which is the country’s No.6 private life underwriter by assets under management, plans to sell a maximum of 26% to strategic investors and through an IPO.
An alternative to listing would be strategic sale of up to 26%, Reliance Life said.
An industry analyst, who declined to be identified, said a 20 to 26% stake could be worth roughly $750 million to $1 billion.
The strategic investor would be a foreign insurer, which might be joined by a financial investor such as a private equity firm or sovereign wealth fund, Ghosh said in an interview at his office in central Mumbai.
He said bringing in a strategic investor would establish a valuation benchmark ahead of an IPO.
“Ideally we’d like to finish this sale before 31 March,” he said of the strategic stake sale. Reliance Capital’s fiscal year runs from April to March.
Reliance Life is seeking a waiver from a requirement that an insurance company be in business for 10 years before an IPO, and aims to be the first Indian life underwriter to list.
India’s first foreign-backed insurance joint ventures — between ICICI Bank and Prudential Plc, Max India and New York Life, and Housing Development Finance Corp and Standard Life — are said by insiders to be eyeing IPOs after they cross the 10-year mark next year.