Mumbai-based Dewan Housing Finance Ltd (DHFL), the third largest housing finance firm in the country, has entered into negotiations to acquire majority stake in DLF Pramerica Life Insurance Company, a joint venture with US-based Prudential Financial.
“It will take some more time, may be around three months to complete the transaction,” a person close to Dewan Housing Finance (DHFL) said. “Besides valuation, other nitty-gritty need to be finalised,” he added.
Sources close to the deal say DLF is likely to exit at marginal premium over the Rs 235 crore it had invested for a 74% stake in the joint venture with Prudential Financial, the second-largest life insurer in the US. The latter holds the remaining 26% in the JV.
Industry sources say that Prudential Financial is being advised by leading investment bank Goldman Sachs and Kapil Mehta, who was earlier the chief executive officer of the joint venture. Mehta is currently running SecureNow Insurance Brokerage, an insurance brokerage firm.
A DLF spokesperson declined to comment. “As a policy, we, at DHFL, do not comment on market speculation. We, therefore, have nothing to say on the matter,” a company spokesperson said. Kapil Mehta and Goldman Sachs also did not reply to ET queries.
DLF and Prudential were earlier in discussion with Shiv Nadar-controlled HCL group for almost two years and had agreed to bring HCL as Indian partner in the first stage. Subsequently, the plan was for HCL to have bought out DLF stake after receiving regulatory approval. However, the deal was called off earlier this year, because HCL did not agree with some of the terms of the US partner, two people familiar with the development told ET. The HCL group declined to comment.
“DLF has already stated that insurance is a non-core business it would like to exit. It has told Prudential to find a suitable partner for the JV,” said one of the persons quoted above. “Since the US firm will work with Indian partner, it was decided that Prudential will find a suitable candidate,” he added.
In March this year, Future Group had sold 22.5% stake in its life insurance joint venture with Italy’s Generali Group to Industrial Investment Trust Ltd in a transaction estimated at Rs 280-300 crore. At that price, Future Generali India Life Insurance Company was valued at about Rs 1,250 crore.
Besides buying out the 74% stake from DLF, Dewan Housing will also commit to infuse fresh capital to fund the future growth of the business. Since DLF is reluctant to infuse fresh capital, Prudential alone cannot pump in additional equity in the JV without proportionate contribution from the Indian partner. This in turn has affected the growth of the insurance venture that is operating for almost five years, a senior analyst in the insurance sector said. Dewan Housing is the third largest housing finance company in the country with 296 branches and 151 alliance partners. Last fiscal ended march 2013, it has Rs 36,100 crore of assets under management, and net profit of Rs 452 crore.
