Warburg Pincus-PremjiInvest Lead the Race for SBI General Insurance Stakes

The Australian General Insurer-Insurance Australia Group (IAG) is leaving its 74:26 domestic joint venture with SBI (State Bank of India) in SBI General Insurance. Private equity players Warburg Pincus and PremjiInvest have been identified as the forerunners in the race to pick IAG’s minority stake.

"Warburg Pincus and PremjiInvest are in advanced negotiations to jointly buy IAG's 26 per cent stake in SBI General Insurance. An agreement is likely to be signed in a week's time and a formal announcement is expected shortly," as shared by an official.

Out of 26% stake, PremjiInvest might happen to pick greater stake than Warburg Pincus, which may get it a seat in board, as part of the proposed transaction. The stake sale process is being managed by the Investment Bank Goldman Sachs.

As shared by an IAG spokesperson, "In our FY19 result in August, we confirmed that discussions had been held with external parties regarding a potential sale of all or part of our 26 per cent interest in SBI General. IAG is in advanced discussions with a number of bidders, which may result in one or more transactions being completed. We will inform the market if or when there is a material update."

PremjiInvest and Goldman Sachs denied comment on the news. However, responses from Warburg Pincus and SBI are awaited.

SBI, in September 2018 sold 4% stake in SBI General insurance for Rs. 482 Crore. On the basis of the same benchmark, 26% stake would cost nearly Rs. 3,120 Crore.

SBI General Insurance has three major customer segments - Retail, Corporate, and SME; where Retail caters to individuals and families, and corporate serves to mid-sized organisations. It offers the retail customers varied insurance products including health, motor, personal accident, home and travel insurance. Some of the products offered in commercial space include liability insurance, marine, fire, aviation, construction, and package insurance.

This is not the first time that Warburg Pincus has encountered the insurance space in India. In September, it sold its 9% stake in ICICI Lombard General Insurance which it had later purchased in May 2017 from Fairfax Financial Corporation before public offer.

Speaking on the Mergers & Acquisitions activity in the general insurance sector, the Partner and National Leader of Financial Services of EY India, Abizer Diwanji stated that general insurance space does not require huge capital investment as in case of life insurance. Other attractive reasons for interest by outside parties in this segment include under-penetration of the market and quick development of products.