Old Mutual leaves India

• Kotak joint venture sold as group breaks up and emerging-market focus turns to Africa

Old Mutual has left India, selling its share of a joint venture with that country’s Kotak Mahindra Bank, one of several disposals planned as the group separates its four core units and its emergingmarkets arm retreats from markets outside Africa.

Old Mutual has left India, selling its share of a joint venture with that country’s Kotak Mahindra Bank, one of several disposals planned as the group separates its four core units and its emerging markets arm retreats from markets outside Africa.

On Friday, the group headed by CEO Bruce Hemphill, said it had sold its 26% interest in Kotak Mahindra Old Mutual Life Insurance for 12.9-billion rupees ($200m).

The insurance and investment venture was a partnership between the bank and Old Mutual SA, part of Old Mutual Emerging Markets (Omem). The deal follows the sell-down of its holding in US fund manager Old Mutual Asset Management to 25.9% from 50.8%.

Adrian Cloete, portfolio manager at PSG Wealth, said Old Mutual would make a profit on the Kotak sale. “Management expects to receive a net consideration the equivalent of £141m and as the carrying value [at December 2016] of the stake was only £45m, they should realise a profit of £96m — about 0.5% of its market value.

“Old Mutual’s management indicated that they will use the proceeds for general corporate purposes, so it’s likely that the proceeds could be used to repay some of the debt at the Old Mutual plc level,” Cloete said.

The group had £1.3bn of debt on its balance sheet at the end of December.

After the strategic review of its emerging markets portfolio, Omem, which operates in 18 countries, could offer those businesses outside Africa for sale. In China, it owns half of Old Mutual-Guodian with power generator China Guodian.

Kotak and Guodian reported a 24% fall in profit to R 137m in the 2016 financial year, driven by losses from lower investment income in China.

In Latin America, Old Mutual owns Old Mutual Holding de Colombia; a savings and retirement business in Mexico; and a distribution platform, Aiva, in Uruguay. These businesses grew their combined profit 29% to R 474m in 2016, which was minuscule compared with a cumulative R 12.3bn profit from Omem’s businesses in Africa.

Old Mutual said it would focus on its high-return and cash-generative businesses in sub-Saharan Africa and would improve investments in East and West Africa.

“Omem is likely to use the proceeds … to repay some of the debt at the Old Mutual plc level or invest it at Omem level in sub-Saharan Africa, which could include SA,” said Cloete.