Mukesh Ambani led Reliance Industries Limited (RIL) has been awarded an official sanction from the Competition Commission of India (CCI) for buying out Bharti group’s 74 per cent stake in insurance joint ventures with AXA of France. RIL – Bharti AXA deal is first deal to be cleared by CCI since June, as per the newly framed competitive law.
As per the competition law that went effective starting June 1, all high value deals need to have clearance of CCI – the monopoly watchdog. A merger deals comes under CCI microscope if the combined turnover of the two companies involved is Rs 4,500 crore and above.
Bharti Group, India’s known telecom major, had chosen to opt out of financial services sector as the venture did not fit into the company’s long-term growth plans. Moving out of its JV with AXA, Mukesh Ambani led Reliance Industries has stepped in to partner up with AXA in place Bharti’s place for two of the key services – Bharti AXA Life Insurance and Bharti AXA General Insurance. Bharti owned a total of 74 per cent stake in both general and life insurance businesses, and it has sold the same to RIL for an undisclosed amount.
RIL will now own 57 per cent stake while its subsidiary Reliance Industries Infrastructure (RIIL) will own 17 per cent stake in both the insurance companies to become AXA’s latest JV partners in India. AXA will continue to hold 26 per cent stake in the ventures.
With hopes of tapping into the financial services sector of India, RIL has acquired a great lead following this buyout. With other significant mergers, either already signed or awaiting sanction, already in line, Reliance is stepping into India’s financial services sector with an astute plan. RIL has slowly been making progress towards making its grand entry into the sector and has entered into significant joint ventures with international hedge fund leader D E Shaw and a likely tie-up with payment gateway leader AmEx to help push the vision to realization.