ADIA plans to invest in Aditya Birla’s health insurance business

The Abu Dhabi Investment Authority (ADIA) is in talks with Aditya Birla Group to invest around Rs 1,200-1,500 billion as growth capital in the Indian conglomerate’s health insurance arm, insiders said.

Aditya Birla Health Insurance Co Ltd (ABHICL) is one of five active standalone health insurance companies with a market share of 14% of gross written premiums in the first three months of the current financial year, according to data from the Insurance Regulatory and Development Authority of India (IRDAI).

Discussions over a minority stake are expected to gain momentum in the coming weeks as ADIA, one of the world’s leading sovereign wealth funds (SWFs) intends to double down in India’s financial services space, the people cited above said.

The final amount and bet size are yet to be determined, they added.

Last month, ADIA bought into IIFL’s home finance arm with a 20% minority stake for Rs 2,200 crore.

An ADIA spokesman declined to comment.

Mails sent to

and spokespeople for the Aditya Birla Group on Saturday had not received a response as of Sunday’s press time.

ABHICL is a 51:49% joint venture between the Aditya Birla Group and MMI Holdings based in South Africa. The company was founded in 2015 as an independent health insurance company. Operations started in October 2016.

STRONGER CONNECTION

The investment, once completed, would underscore the growing links between the Abu Dhabi sovereign wealth fund and Kumar Mangalam Birla. ET, in its 22 October 2021 edition, was the first to report that Birla is working with Hamed bin Zayed Al Nahyan, Managing Director of ADIA, to invest in Zand, the UAE’s first digital-only independent bank. The initial plan is to allocate US$50-100 million as a private investment by the Birla family, but the amount may increase in the future as the company grows.

Earlier this month, Sushil Agarwal, CFO of Aditya Birla Group, joined the bank’s high-profile board created ahead of its upcoming launch.

India’s fast-growing financial services have always been a strong area of ​​focus for ADIA alongside infrastructure. In the past it has accepted bets at several leading listed banks and NBFCs including HDFC Bank, Kotak Mahindra Bank, Reliance Capital and KKR India Financial Services.

Despite legal upper limits, health insurance has experienced an upswing in recent years. Kedaara Capital bought into Religare Health Insurance Co Ltd in June 2020. Last year, mortgage lender HDFC Ltd announced it would acquire a controlling stake in Chennai-based Apollo Munich Health Insurance Company Ltd for Rs 1,495.81 crore. Also in 2019, TTK Group exited the Cigna TTK Health Insurance joint venture by selling its 31.5% stake to Manipal Group for Rs 500 crore. Similarly, Max India sold its 51 percent stake in Max Bupa Health Insurance Company to private equity firm True North.

At the end of FY2022, Aditya Birla Health Insurance’s gross written premium or total insurance premium collected increased by 33% year-on-year to Rs.1,740 crore. A full 66% of that came from the retail segment. The company claims to protect 18 million lives, of which over 14 million are covered by microinsurance products. According to its website, it is present in over 2,800 cities through branches and partner offices, partnerships with 11 banks in over 16,000 locations and over 51,000 agents selling their policies.

In its earnings presentation for the fourth quarter of FY22, the company claimed that over the past 13 years, the company has registered a CAGR of 51% against industry growth of 17%.

Rakesh Jhunjhunwala backed Star Health & Allied Insurance Co Ltd, the leader in the category with a share of almost 50% or Rs 950 crore of gross premiums written this financial year ended June, was listed on the local stock exchange in December 2021 and is now valued at Rs 35,721 crore, although the share price has now fallen to Rs 620 each from the upper band of the IPO price of Rs 900 per share. Aditya Birla’s health insurance business is the fourth largest single player in this segment.

Low health insurance penetration, rising hospitalization costs and increased awareness due to Covid-19 mean there is great potential for health insurance in India. Health insurance premiums have become an important source of income for general insurance companies. Health insurance is the fastest growing segment, growing nearly 35%. Innovations such as offering coverage for outpatient or hospital expenses and insurance for specific diseases also have ample scope in India.

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