India-born Canadian billionaire Prem Watsa-led Fairfax Financial Holdings Ltd has taken another step to establish its presence in the South Asian nation’s insurance industry with the acquisition of a reinsurance company.
Fairfax-backed Go Digit Infoworks Services Pvt. Ltd, the parent of Go Digit General Insurance Ltd, has agreed to acquire ITI Reinsurance Ltd from The Investment Trust of India Ltd, the seller said in a stock-exchange filing.
The Investment Trust was known as Fortune Financial Services India Ltd until a couple of weeks ago when it changed its name. The company counts among its promoters Sudhir Valia, an executive director at Sun Pharmaceuticals Industries Ltd and the brother-in-law of the drugmaker’s founder Dilip Shanghvi.
According to the filing, the total deal value will be equal to the net asset value plus a premium of Rs 13.1 crore. The Investment Trust said owns an 80% stake in ITI Reinsurance and the subsidiary contributed Rs 425.4 crore to its net worth. This would put the total deal value for 100% of ITI Reinsurance around Rs 545 crore ($79 million).
Lakshdeep Investments and Finance Pvt. Ltd and Suraksha Realty Ltd hold 10% each of ITI Reinsurance. They are also selling their stake to Go Digit Infoworks, the filing said.
The deal is subject to approval from the Insurance Regulatory and Development Authority of India and is likely to close within three months after the sector watchdog’s clearance.
The acquisition of ITI Reinsurance, formerly known as Kohinoor India Reinsurance Co. Ltd, follows Fairfax’s decision roughly two years ago to start a new general insurance joint venture in India after ending its partnership with ICICI Bank’s general insurance arm.
In June 2017, Fairfax infused capital into Go Digit after tying up with Kamesh Goyal, a former top executive at German financial services firm Allianz SE. Fairfax owned 45% of Digit at the time while Indian investors led by Goyal held the remaining stake.
ITI Reinsurance is the first private sector domestic reinsurance company in India. It began operations in early 2017.
VCCircle had reported last year that Valia’s Fortune Financial had been eyeing private equity business and was looking to float a sector-focused private equity fund to diversify its business domain.
Fairfax’s India bets
Fairfax is betting big on India, especially untapped sectors such as insurance. The firm has made sizeable investments in more than half-a-dozen Indian companies across sectors.
It launched an India-dedicated vehicle, Fairfax India, in November 2014. In January 2015, Fairfax India floated a public offering in Canada to raise $1.06 billion. In January this year, the firm mobilised another $500 million to invest more in India.
VCCircle reported earlier this year that Fairfax would acquire a 51% stake in Kerala-based Catholic Syrian Bank.
Earlier this month, Fairfax came in as a limited partner for a fund that will make debt investments in affordable housing projects.
Overall, Fairfax has made equity investments of about $1.24 billion since August 2015, when it put in money in National Collateral Management Services Ltd, its annual report shows.
It also has significant minority stakes in financial services group IIFL Holdings Ltd and Sanmar Chemicals Group besides owing majority stakes in travel services company Thomas Cook (India), business services firm Quess Corp, Sterling Resorts and Fairchem Speciality.
