Tatas exits race to buy Reliance Capital’s general insurance arm

Tata AIG General Insurance Company, a subsidiary of Tata Sons, has pulled out of the race to buy Reliance Capital’s general insurance arm, Reliance General Insurance Company (RGICL), following the delayed sale and in light of a rule under which the company will have to bid for a few other companies with other bidders as partners.

The rule of bidding for more than one group and with other bidders was set midway by lenders to get better deals for all assets. “The Tata group was only interested in the general insurance company but they were asked to bid for other clusters as well by forming a consortium. As the expression of interest was made by Tata AIG General Insurance, they were not interested in bidding for other companies and so they walked out,” said a banker familiar with the development.

The Tata Group has not commented on the development. The sale of the assets by the lenders has already been delayed as they asked for time until November to complete the sale of the assets of Reliance Capital, which was referred for debt settlement in bankruptcy court last December.

Tata AIG is owned by Tata Sons and AIG, which own 74% and 26% of the company respectively. Tata AIG has a strong presence in the commercial business segment due to expertise derived from its parent company, AIG, and the company was looking to grow its retail and small and medium enterprise (SME) business through the acquisition by RGICL.

RGICL has become one of the leading players in the non-life insurance sector with almost 4.2% market share in the general insurance sector as of fiscal year 2020-21 (fiscal year 21) . RGICL’s investment portfolio stood at Rs 13,861 crore as of December 31, 2021, with Rs 13,414 crore in debt securities. Almost half of total debt investments were in government securities and 24% in highly rated debt securities. In the nine months ended December 31, 2021, RGICL made a profit of Rs 197 crore and earned a gross premium of Rs 7,200 crore.

With the Tatas out of the race, bankers said the race is now between Piramal Enterprises and Torrent Group, who carry out due diligence for the whole business. For the property and casualty insurance cluster, however, Zurich Insurance Group and US private equity giant Blackstone have shown interest, while Cholamandalam Group has shown interest in the life insurance cluster.

Several lenders including Life Insurance Corporation of India have made total claims of Rs 23,666 crore against Reliance Capital. As the sale of assets has been delayed, LIC has sought offers from asset reconstruction companies to sell its loan worth Rs 3,400 crore, according to an announcement by IDBI Capital Markets & Securities.

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