Tokio Marine raises stake in IFFCO-Tokio JV to 49%; move to help boost India presence

Japanese major Tokio Marine has raised its stake in Indian insurance joint venture IFFCO-Tokio to 49 percent. The development comes two years after the Indian government relaxed the foreign direct investment (FDI) limit in insurance from 26 percent to 49 percent.

IFFCO-Tokio is a general insurance company that offers insurance in categories such as motor, health, travel and home, among others. It was established in 2000 just after the Indian insurance sector was liberalised by the then government.

Prior to the transaction, Tokio Marine held 26 percent stake in the joint venture, while a majority amounting to 72.64 percent was held by IFFCO, the world’s largest processed fertilisers cooperative. Another 1.36 percent was held by Indian Potash Limited.

The current transaction values IFFCO-Tokio at a whopping Rs 11,000 crore as Tokio Marine has picked up a 23 percent stake in the company for Rs 2530 crore from IFFCO and Indian Potash Limited, paving a full exit for the latter.

Post transaction, there will be only two joint venture partners - IFFCO, which will hold 51 percent stake in the company, and Tokio Marine that will hold the remaining 49 percent.  

“With continuous high economic growth and increasing middle income population, the Indian insurance market is expected to grow rapidly,” said K Srinivas Gowda, Chairman, IFFCO-TOKIO.

Experts say the deal will help the Indian company utilise Tokio Marine’s expertise and know-how in the insurance sector from other geographies. For the Japanese company, however, it will create an opportunity to strengthen its presence in the Indian market which is currently grossly under penetrated. In fact, it is this “untapped growth” in India that is increasingly throwing up interest among global players.
Currently a host of foreign insurers are waiting in wings to tap the Indian market, while others are looking to increase their stake in their Indian joint venture partners.

Arthur Lee, CEO at Tokio Marine said: “The additional share purchase is in line with Tokio Marine Group’s international business strategy to achieve sustainable growth and profit expansion as well as enhance diversified business portfolio through capturing growth opportunities in emerging countries.”

Currently, in the general insurance sector, there are as many as 31 players, while in life insurance, there are 24 players including the public sector giant Life Insurance Corporation. Almost all private players operating in the market have foreign joint venture partners.