Bharti Acquires AXA’s Stake: Joint Venture Buyout 2023
In a significant move that underscores the evolving landscape of India’s insurance sector, Bharti Enterprises, one of India’s leading business groups, has announced its intentions to acquire the stake held by AXA in their joint venture.
Bharti Enterprises and AXA, a global insurance giant, have been partners in a joint venture in India for several years.
Together, they have built and managed businesses in the life and general insurance sectors, benefiting from Bharti’s deep knowledge of the Indian market and AXA’s global expertise in insurance.
Details of the deal indicate that Bharti is keen to consolidate its position in the insurance market by taking full ownership of the joint ventures.
On Wednesday, the Bharti Group announced that it has reached a legal agreement with its joint venture partner AXA to buy its 49% investment in the Bharti AXA Life Insurance.
Following the deal, the life insurance provider will be 100% owned by Bharti Life Ventures, the holding company of Bharti AXA Life Insurance Company. According to a statement released by Bharti on Wednesday, Bharti Life Ventures has now entered into an agreement to fully own Bharti AXA Life Insurance.
This is in accordance with Bharti and AXA’s decision to merge Bharti AXA General Insurance with ICICI Lombard in 2020 and AXA’s subsequent exit from the shareholding of ICICI Lombard.
The acquisition is pending regulatory approval and is anticipated to finalise by December 2023.
Bharti AXA Life Insurance began operations as a joint venture in 2006, with Bharti Group and AXA Group each owning 74% and 26% of the company, respectively. AXA boosted its interest in the JV to 49% when the government raised the foreign investment limitation in a domestic insurance business from a 26% stated specified maximum to 49% in 2015.
Bharti and AXA established a second joint venture, Bharti AXA General Insurance, in 2006. 2020 saw the withdrawal of Bharti and AXA from the general insurance industry with the sale of the business to ICICI Lombard. ICICI Lombard General Insurance and Bharti AXA General Insurance were combined.
After receiving the required clearances from the National Company Law Tribunal (NCLT) and the Insurance Regulatory and Development Authority of India (Irdai), the deal went into effect on September 8, 2021.
According to data released by the Life Insurance Council, Bharti AXA Life Insurance reported a 12.37% year-over-year decline in its new business premium to Rs 377.54 crore for the first quarter of this fiscal year, despite the fact that the first-year premium for 26 private sector life insurance companies as a whole increased by 13.75% to Rs 65,734.19 crore.
The life insurance firm reported an increase in new business premium of 8.79% year over year, from Rs 934.71 crore in FY22 to Rs 10,16.91 crore in FY23.
While the exact financial specifics of the deal might be under wraps, industry analysts predict that it will be a significant sum given the successful track record of the joint venture and the growth potential of India’s insurance market.
India’s insurance sector has shown robust growth in recent years. With a large population and a growing middle class, the potential for insurance products, both life and general, is immense. Bharti might see an opportunity to capitalize on this growth by having full control.
Having full ownership can allow Bharti to implement its strategic vision more seamlessly, without the need for coordination with another major stakeholder.
It’s possible that the financial dynamics of the joint venture have changed, making it more lucrative for Bharti to own the entire business rather than share profits.
With Bharti taking full control, it may bring in new strategies and offerings that could shake up the market, leading to increased competition.
The buyout might send mixed signals about the Indian market to foreign investors. While it underscores the growth potential, as seen by Bharti’s keen interest, it might also be seen as a sign of international players facing challenges in navigating the market.
It remains to be seen how AXA will realign its strategy post this deal. Given the size and growth potential of the Indian market, it’s unlikely that AXA will completely retreat. Instead, they might explore new partnerships or even consider solo ventures in the future.
Bharti’s move to buy out AXA’s stake in their joint venture is a bold one. As the insurance sector in India continues to grow and evolve, this deal will undoubtedly have significant implications for both the companies involved and the industry at large. It’s a development that industry stakeholders will be keenly watching, as it could shape the direction of the market in the coming years.
