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Friday, July 29, 2011

Metlife India sells 30% stake to PNB

Very soon Metlife India would be known as PNB Metlife India. India’s 2nd largest nationalized bank, Punjab National Bank (PNB), has decided to take a lion’s share of 30% stake and occupy a dominant position in Metlife’s Bancasurance space (Currently Metlife has tie-ups with Karnataka Bank and Barclays). Rajesh Relan, MD, Metlife India, opined that the addition of PNB will help Metlife convert into a significant player in the insurance industry and in return the insurer can provide insurance expertise and bancassurance capabilities that will be an asset to PNB.

The edge that Metlife enjoyed over a dozen suitors was that it has a diversified Indian shareholding which helped PNB become the dominant shareholder. Metlife will issue fresh shares to PNB which will increase the size of the company’s capital to Rs. 2,596 crore and later buy stake from the other existing stakeholders to maintain its stake at 26% within 120 days. PNB’s entry will dilute the equity of all the existing shareholders which include M Palonji and Co, Jammu & Kashmir Bank and IGE (a Pune-based company), besides a clutch of private equity investors.

Another positive aspect of the move is that PNB will be able to take insurance to the mostly untapped rural and semi-urban pockets of India. Statistics show that 60% of PNB’s branches are in the rural and semi-urban areas, which can help augment the insurance penetration in the country. Industry analysts have also welcomed the partnership believing that it has the potential to drive Metlife into the top-tier of the Indian life insurers and also go a long way in doubling its market share.

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