Reliance Life parleys with banks for 5% stake sale

Reliance Life Insurance Company, a part of Anil Ambani Group’s financial services arm Reliance Capital, has initiated discussions with few banks for a stake sale of up to 5 per cent as part of forging alliance as a bancassurance partner.

As a bancassurance partner, the bank would help expand the product distribution network of Reliance Life Insurance. In this context, Reliance Life President and Executive Director Malay Ghosh maintained that they are looking for a bank partner of significant size and are in touch with a couple of banks for alliance.

At the same time, Ghosh added, “We are also open to the idea of giving a very small equity to a bank of critical size as distributor stock option.”

Ghosh made it clear that Reliance Life would not offer any upfront payment for the bancassurance alliance. “If a bank in five years can create value for us, we are open to give small equity (5 per cent) to them at today’s valuation with guarantee to buy them back at future valuation. This is what we are pursuing while talking to banks for a bancassurance tie-up,” he said.

It may be noted that Reliance Life Insurance had sold 26 per cent stake last year to Japan-based Nippon Life Insurance Co for around Rs 3,062 crore.

Conceding that the company is faced with a distribution gap, another top offical of Reliance Life Insurance here said if bancassurance tie-up with one entity turns out to be inadequate, they may rope in another bank on similar terms.   

In insurance parlance, the term ‘bancassurance’ is used for distribution of insurance products through the bank branches and currently this model of insurance distribution accounts for 25-30 per cent of premium income for private insurers in the country.