Goldman Sachs in talks to acquire stake in Royal Sundaram

Mumbai: Top American investment bank Goldman Sachs is in talks to acquire a stake in Royal Sundaram General Insurance Co. Ltd, the insurance business of financial services group Sundaram Finance Ltd, through one of its private equity funds, said two people aware of the development.

Royal Sundaram offers motor, health, personal accident, home and travel insurance to individual customers and offers specialized insurance products for fire, marine, engineering, liability and business interruption risks to commercial customers.

Royal Sundaram also offers products designed specifically for small and medium enterprises and rural customers.

“Royal Sundaram has been in the market to sell a significant minority stake to bring on a partner to help fund the growth of the business. One of the financial investors that has shown interest in picking up a stake is Goldman Sachs. The two parties are engaged in discussions,” said one of the persons cited above, requesting anonymity as he is not authorized to speak with the media.

However, he cautioned that the talks between Goldman Sachs and Royal Sundaram might not necessarily result in a deal.

Goldman Sachs declined to comment.

Emails sent on Saturday to Royal Sundaram General Insurance Co. did not elicit any response.

Mint had first reported Royal Sundaram’s plans to divest a stake in November.

On 17 November, Bloomberg reported that private equity firms Apax and Carlyle Group were keen on looking to bid for a stake in Royal Sundaram.

Bloomberg reported that the insurance company was looking to sell up to 49% stake in the company, which could fetch the company around $500 million.

Mint could not ascertain the contours of Goldman Sachs’s discussions with Royal Sundaram.

Royal Sundaram was born as a joint venture between Sundaram Finance and Royal & SunAlliance Insurance Plc, UK. In July 2015, Sundaram Finance acquired the 26% equity holding from Royal & SunAlliance Insurance.

In 2016-17, Royal Sundaram reported gross written premium of Rs2,188.7 crore, up 29% from the previous financial year, out of which personal insurance policy premiums were Rs1,373 crore and commercial insurance premiums Rs831 crore. The company reported a net profit of Rs43 crore in 2016-17, compared to a profit of Rs26.6 crore in the previous fiscal.

The market share of the company stood at 1.73% among all general insurance firms.

On Monday, shares of Sundaram Finance fell 0.65%, or Rs10.45, to Rs1,606.65 apiece on BSE while the benchmark Sensex rose 1.44%, or 469.87 points, to 33,066.41.

Private equity investors have shown a keen interest in the insurance sector in the last few years, taking large bets in both life and non-life spaces.

In May 2017, a group of investors including private equity major Warburg Pincus picked up a 12.18% stake in IPO-bound ICICI Lombard General Insurance Co. Ltd for around $383 million.

Earlier in April 2017, Religare Enterprises Ltd announced the sale of its 80% stake in Religare Health Insurance Co. Ltd (RHI) to a group of investors led by True North, valuing the health insurance business at Rs1,300 crore.

The ongoing sale of health insurance company Star Health and Allied Insurance has attracted private equity funds such as Westbridge and PremjiInvest, according to media reports. The sale of Star Health is expected to attract a price tag of around $850 million to $1 billion, livemint

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