Kotak Mahindra to buy out Old Mutual in insurance JV

Kotak Mahindra Bank Ltd will acquire the 26% stake owned by its joint venture part ner Old Mutual Plc in Kotak Mahindra Old Mutual Life Insur ance Ltd for ₹1,292.7 crore, the private sector lender said in an exchange filing on Friday. After the buyout, Kotak Mahindra Life Insurance will become a 100% unit of Kotak Mahindra Bank.

Kotak Mahindra Old Mutua Life, which collected a total first year premium of ₹2,849.74 crore in 2016-17, is ranked sixth among 24 life insurers in the industry in terms of premium collected.

The deal is subject to regula tory approval from Reserve Bank of India, Securities and Exchange Board of India and Insurance Regulatory and Development Authority of India and may take 3-4 months to be finalised, said a spokesperson at Kotak Mahindra Life Insurance. “The bank will fund the acquisition either through internal accruals or from the capital that it has pro posed to raise this financial year The bank’s board has recently passed a resolution to raise capi tal by way of selling up to 62 mil lion shares and at the current price this may mean a capita raise of ₹5,000-6,000 crore.”

Old Mutual’s exit comes at a time when the insurance indus try is going through a phase of consolidation that began last Sep tember with ICICI Prudential Life Insurance Co Ltd’s ₹6,000 crore new share sale.