Mahindra & Mahindra Ltd. (M&M) on Thursday announced that its board of directors has approved entering into a joint venture with Canada’s Manulife Financial Corporation to carry on the life insurance business.
M&M and Manulife have entered into an agreement to establish a 50:50 life insurance joint venture, subject to regulatory approval. will hold 50% of paid-up share capital in the proposed joint venture company, and the balance 50% paid-up share capital will be held by Manulife or any of its affiliates in accordance with the aforesaid joint venture agreement.
“This new venture will strengthen Mahindra and Manulife’s existing footprint in India and underscores their commitment to enhancing the financial wellbeing of customers in one of the world’s fastest-growing markets,” M&M said in a release.
Upon regulatory approval, this joint venture will expand on the collaboration between Mahindra and Manulife in India, following the successful launch of Mahindra Manulife Investment Management in 2020.
“The total capital commitment from each shareholder is up to ₹3,600 crore ($400 million), we expect each shareholder to invest ₹1,250 crore (US$140 million) in the first 5 years,” M&M said.
Following the signing of the agreement, and Manulife teams will work together to apply for an insurance license.
“Manulife is the best natural partner for us given their global capabilities in insurance products, underwriting and reinsurance. With a focus on leveraging technology the joint venture will build an efficient, customer-centric insurer in India. We are confident that this joint venture offers a very compelling opportunity to create meaningful value for our shareholders,” said Anish Shah, Group CEO & Managing Director, Mahindra Group.
Terms of Agreement
As per the terms of the agreement, M&M and Manulife will each have the right to nominate two directors to the board of the JVCo. M&M will have the right to restrict any change in capital structure of the JVCo., including by way of infusion of fresh equity capital other than agreed between the shareholders of the JVCo.
M&M will also have the right to restrict approval and amendment of the annual business plan and distribution strategy for the JVCo, as determined in accordance with the JVA. It will also have a right to appoint, replace and remove certain key management personnel after their initial appointment.
Kotak Investment Banking acted as financial adviser and AZB & Partners acted as legal counsel to Mahindra Group. Debevoise & Plimpton LLP acted as legal counsel to Manulife.
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