MetLife India Insurance Company has got the approval from the Insurance Regulatory and Development Authority (IRDA) to transfer 30 percent shares to Punjab National Bank (PNB).
MetLife, which is a joint venture between US based MetLife International and M. Pallonji & Co. Ltd and a few other investors, had been facing constraints with regards capital contribution. IRDA had intervened in the way capital calls were being made at MetLife and asked to identify an optimal solution. One of the stake holders of MetLife, Jammu and Kashmir (J&K) Bank was ordered by Reserve Bank of India (RBI) to restrict their investments in MetLife and hence it was brought down from 25% to 13.94% of the paid up capital. When it become clear that J&K Bank will be exiting the insurance joint venture, IRDA had advised MetLife to find another suitable partner to take over J&K bank’s holding. Against the background of these financial constraints, MetLife had proposed to issue 30 percent of equity shares to PNB on non-cash consideration basis. The consideration was that PNB would commit to work as a corporate agent of MetLife for ten years.
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IRDA was sceptical that such a non-cash deal would lead to unhealthy practices and was not in the interest of the growth and development of a sound insurance industry. Therefore IRDA had rejected this proposal of acquisition of stake for consideration other than cash. MetLife approached IRDA with a revised proposal which said that PNB will be inducted as 30 percent shareholder with existing shareholders of MetLife selling their shares to PNB. The consideration here was that MetLife will be allowed to use the PNB brand at a notional value of Re.1. No other consideration is being paid by PNB to existing shareholders. The shares held by PNB will be locked-in for a period of five years from the date of transfer. Additionally, the name of the company will be changed to PNB MetLife India Insurance Co. Ltd.
