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L&T to sell 49% in insurance


arm
M Saraswathy & Ashley Coutinho | Mumbai
February 29, 2016 Last Updated at 00:33 IST

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Infrastructure and engineering major Larsen & Toubro


(L&T) is planning to sell 49 per cent stake in its general
insurance company to a foreign entity. The deal is
expected to be finalised in the next three to six months.

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L&T General Insurance Company is a wholly owned


subsidiary of L&T and among the few in the sector without
a foreign partner. The Insurance Laws (Amendment) Act of
2015 has allowed foreign direct investment (FDI) up to 49
per cent in insurance companies. Earlier, only 26 per cent
FDI was allowed. "The stake sale is primarily targeted at
monetisation. The firm has been going it alone so far and
the aim is to bring in a foreign partner, which can bring in
the requisite underwriting expertise and technological

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entities for a stake sale. An e-mail to the company on this


experts estimate this agreement could value the general
insurer at around Rs 1,500 crore. In March 2013, L&T,
Kishore Biyani's Future Group and Generali Group had
signed a non-binding term sheet for the merger of L&T
General Insurance and Future Generali India Insurance.

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This was a first-of-a-kind proposed in the sector. L&T was


to hold 51 per cent stake, Generali Group 26 per cent and
23 per cent by Future Group.

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However, in April 2014, L&T General and Future Generali India said they were calling off the
venture, due to 'inordinate delay' in finalising a transaction. L&T General Insurance posted a loss of
Rs 68.5 crore for the April to December period in the current financial year, after a Rs 70 crore loss
for the same period in the previous year. In an earlier interview, G C Rangan, director and chief
executive officer, had told Business Standard they'd break even in 2017-18. The insurer collected
net premium of Rs 240.3 crore for April-December, compared to Rs 174.5 crore in the same
period a year before.
Apart from insurance, L&T is reportedly looking to sell a 49 per cent stake to a strategic partner in
its mutual fund (MF) business as well. L&T Finance had bought Fidelity's Indian MF arm in early
2012 for about Rs 550 crore, to become the 13th largest fund house, with assets of Rs 13,500
crore. The fund house is still ranked 13th but its assets had risen to about Rs 25,000 crore as of
end-December 2015.

Sources say L&T should get


roughly Rs 600 crore if it sells its
stake at five to six per cent of its
assets under management. Apart
from monetisation, L&T MF is
looking at improving its distribution
reach and is likely to sell stake to a
domestic bank.

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LARSEN & TOUBRO

L&T GENERAL INSURANCE COMPANY

L&T
FDI

GENERAL INSURANCE
LARSEN & TOUBRO,

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