What is a Joint Venture?

A Joint Venture (JV) is a cooperative enterprise entered into by two or more business entities for the
purpose of a specific project or other business activity. The reason for a joint venture is usually some
specific project.

Joint ventures can be informal (a handshake) or formal, and they can be short term or long term.
Often the joint venture creates a separate business entity, to which the owners contribute assets,
have equity, and agree on how this entity may be managed. The new entity may be
a corporation, limited liability company, or partnership.

In other cases, the individual entities retain their individuality and they operate under a joint venture
agreement. In any case, the parties in the JV share in the management, profits, and losses, according
to a joint venture agreement (contract).

Joint ventures are often entered into for a single purpose - a production or research activity. But they
may also be formed for a continuing purpose.

Joint ventures are, basically:

Separate companies with a shared interest and goals

Both companies have some proprietary (ownership) basis for in this shared interest. For example, two
companies with online patents for accounting apps might form a joint venture.

They agree to share income and expenses.

Both companies in a joint venture maintain their separate identities for all purposes except those of
the joint venture.
Why Form a Joint Venture?
Businesses form joint ventures for several reasons:

To combine resources. A bigger entity may have more clout in an industry or more resources to
ensure the success of a venture.

To combine expertise. In technical businesses, one company might have expertise in one part of a
venture while the second company might have expertise in another part. For example, Company A
might be good at creating software, while Company B has experience creating the hardware that's
needed for a venture.

To save money. Two companies might consider a joint venture to save money on advertising, maybe
at a trade show or in a trade publication.

What is the organisational structure in a JV?

• The parties involved in the joint venture must agree on the best structure for the relationship.
They can choose to make it as detailed as they like. However, certain elements should be
included to make the chart relevant and valuable. It should include who within each party will
make the decisions, and how the work will be distributed between the parties

• Along with specifying which employee reports to which manager, the chart also includes
certain groups that have been established just for the joint venture. For example, the parties
might decide to create steering committees that will create plans to guide the JV in the right
direction

Features of Infinity JV

• Infinity Life Insurance Company was promoted by two large public sector banks in India and a
U.K. based leading risk and wealth management company.

• In this Joint Venture, the U.K. firm would provide necessary technical expertise, and the
Indian banks would be responsible for distribution of Insurance

• The Project Head for this Joint Venture was deputed from the U.K.

• The Joint Venture started with a paid up capital of $46.73 million. As mandated by IRDA, the
share of Indian banks were 74% and the foreign partner was 26%
Why Infinity entered Indian Market?
• Indian Life Insurance Industry which accounts for 87% of total Insurance premiums in
India. A rapid growth could be seen in this industry
• Indian GDP also was projected to grow at a rapid growth from 7% to 15%
• It was also projected that by 2020, the total market size of the Indian Insurance sector
was expected to reach $350 billion and the number of policies sold were estimated to
increase from 53.23 million in 2010 to 85.21 million in 2015