Bajaj Finserv Adjusts Allianz Stake Deal for IRDAI Compliance

In a strategic move to comply with the Insurance Regulatory and Development Authority of India (IRDAI) guidelines, Bajaj Finserv has structured its ₹24,180-crore acquisition of Allianz SE’s stake in its insurance ventures in a phased manner. Instead of acquiring the entire stake at the company level, Bajaj Finserv will purchase only 1.01% in each of the insurance firms, while the remaining shares will be acquired by its promoter entities—Bajaj Holdings & Investment and Jamnalal Sons.

This restructuring ensures that the transaction adheres to IRDAI’s regulatory framework, which governs ownership structures in the insurance sector. By distributing the stake acquisition among different entities within the Bajaj Group, the company aims to facilitate a smooth transition of ownership while maintaining compliance with industry norms.

Bajaj Finserv has structured its ₹24,180-crore deal to acquire Allianz SE’s stake in its insurance ventures in accordance with regulatory guidelines that prohibit stake purchases through borrowed funds. During an investor call following the announcement of the transaction, the company clarified that the restructuring was necessary to align with these insurance sector regulations.

Under this revised plan, Bajaj Finserv will directly increase its stake to 75.01% by acquiring 1.01% in each of its insurance businesses. Meanwhile, its group entities—Bajaj Holdings & Investment and Jamnalal Sons—will purchase the remaining stake, with Bajaj Holdings & Investment acquiring 19.95% and Jamnalal Sons taking 5.04%.

The transaction values Bajaj Allianz General Insurance at approximately ₹53,000 crore and Bajaj Allianz Life Insurance at ₹40,000 crore, based on the ₹24,180 crore payout for Allianz’s 26% stake. By structuring the deal in this manner, Bajaj Finserv ensures compliance with the Insurance Regulatory and Development Authority of India (IRDAI) while facilitating a smooth transfer of ownership.

The acquisition of Allianz SE’s stake in Bajaj Finserv’s insurance ventures is expected to be completed within the next 15 months. Once finalized, the deal will grant Bajaj full control over its insurance businesses, providing the company with greater strategic flexibility to explore new product categories and pursue opportunities for inorganic growth through mergers or acquisitions.

Furthermore, during discussions with analysts, the management indicated that they would consider applying for a comprehensive insurance license for both Bajaj Allianz Life Insurance Company (BALIC) and Bajaj Allianz General Insurance Company (BAGIC). However, this move will be contingent upon the enactment of the proposed amendments to insurance sector regulations. If the legislative changes are implemented, it could open new avenues for expansion and diversification within the insurance market.

The Insurance Regulatory and Development Authority of India (IRDAI) has encouraged large insurance companies to outline a structured plan for going public. However, Bajaj Finserv has indicated that it will reassess the possibility of listing its insurance businesses only after a period of two to three years, once the ownership transition and integration process is fully completed.

Commenting on the financial aspects of the transaction, Avinash Singh of Emkay Global noted that Bajaj Finserv’s direct acquisition of a 1.01% stake requires a payment of approximately ₹940 crore. This amount is expected to be managed through the company’s internal accruals along with the use of short-term bridge loans.

The larger portion of the funding requirement, however, falls on Bajaj Holdings & Investment, which will be acquiring a 19.95% stake from Allianz for ₹18,500 crore. To finance this transaction, Bajaj Holdings & Investment plans to utilize its internal treasury assets by liquidating a portion of its investments. This approach ensures that the deal is executed without reliance on external borrowings, aligning with regulatory norms governing stake acquisitions in the insurance sector.

The future of Allianz’s partnership in its joint ventures with Bajaj Finserv had been uncertain for quite some time, largely due to regulatory challenges. The Reserve Bank of India’s (RBI) Foreign Exchange Management Act (FEMA) regulations created obstacles that prevented Allianz from increasing its stake in the insurance joint ventures. This regulatory roadblock raised doubts about Allianz’s long-term involvement in the partnership and contributed to prolonged uncertainty surrounding Bajaj Finserv’s ownership structure in the insurance businesses. The issue had been a long-standing overhang on Bajaj Finserv, as stakeholders awaited clarity on the next steps regarding Allianz’s stake in the ventures.

As reports suggest, Allianz is actively exploring new partnership opportunities in India, including potential collaborations with Jio. A key development in this transition is the phased reduction of Allianz’s stake in its joint ventures with Bajaj Finserv. Once 6.1% of its stake is transferred, Allianz will no longer be classified as a promoter in these insurance businesses. This change will grant Allianz greater strategic flexibility, allowing it to independently pursue new business ventures and investment opportunities in the Indian market without any regulatory or contractual restrictions tied to its previous role as a promoter.

Bajaj Finserv is currently awaiting regulatory approvals from both the Insurance Regulatory and Development Authority of India (IRDAI) and the Competition Commission of India (CCI) to complete the acquisition of Allianz SE’s stake in its insurance ventures. However, the company does not anticipate significant challenges in the due diligence process. Given that Bajaj Finserv is already the existing promoter of these insurance businesses, it expects a smooth regulatory review without major compliance hurdles.