ALMOST 10 years after it started negotiations with three European insurance companies for a foray into general insurance in India, the Videocon group is tying up America's fifth largest non-life insurer Liberty Mutual for a joint venture.
The tie-up is to be inked by Venugopal N Dhoot, chairman of the $4 billion Videocon group, with David Long, president of Liberty Mutual Group, as early as this week.
When contacted, Dhoot said, "Various parties keep approaching us from time to time. But this does not mean we are getting into the insurance business." As per the regulations,
the US partner will be able to hold a maximum 26 per cent stake in the venture with the balance being held by the Indian promoter.
"The insurance sector is opening up more. Videocon Group is also more aggressive now and wants a complete portfolio of businesses," said Narayanan Ramaswamy, executive director of KPMG.
Shares of Videocon Industries closed at Rs 260.75 on the Bombay Stock Exchange, up 3 per cent, on Monday. At that price, the company had a market capitalisation of Rs 8901 crore.
The non-life insurance sector in India saw gross premium income in the first half of the financial year rise 22.93 per cent to Rs 20,679 crore as per Insurance Regulatory and Development Authority data. "The premium rates
in the non-life insurance business are now more in tune with the risk profile of businesses underwritten, positively impacting this sector," said Timmy Kandhari, executive director financial advisory services of PricewaterhouseCoopers.
"The non-life sector has shorter break-even cycle and is not as capital intensive as the life insurance business.
In that sense, it is more like a FMCG business with a quick break even," said Renny Thomas, senior partner of McKinsey & Company.
Liberty Mutual focuses on broad competitivelypriced insurance products and services and is America's fifth largest property and casualty insurance company. The $7.6 billion company has an 'A' (excellent) rating from specialist credit rating agency AM Best.
Liberty operates in 17 countries worldwide with a mix of offerings ranging from personal, auto insurance, project cargo insurance and professional indemnity covers.
Videocon operates in seven key sectors such as consumer electronics, home appliances, direct-tohome TV services, mobile handsets, GSM services, oil and gas services, LCD panel manufacturing and colour picture tube glass.
Its most recent entry was into the cellular telephony business via the launch of GSM services.
Outside its core consumer durables business, its most successful diversification has been in the oil and gas area where it has interests in exploration, prospecting of oil and gas.
