Paytm, owned by One97 Communications Ltd, and its founder Vijay Shekhar Sharma have agreed to fully acquire general insurer Raheja QBE General Insurance Company Ltd for ₹568 crore in a bid to accelerate the launch of its own insurance business in 24-30 months.
The deal will allow Paytm, currently a distributor of insurance products, to expand into creating and marketing its own insurance products.
The workforce at Raheja QBE will remain unaffected by the deal, according to a statement by Paytm.
Raheja QBE is owned 51% by building materials company, Prism Johnson Ltd, and 49% by Australian insurer, QBE Australia. Prism Johnson, formerly Prism Cement Ltd., is part of the Rajan Raheja group.
“It is an important milestone in Paytm’s financial services journey, and we are very excited to welcome Raheja QBE General Insurance into the Paytm family. Raheja QBE General Insurance is strong in the liability business and have recently launched new products in the motor segment as well. After we get the approvals, we will strengthen the offering by bringing new innovative products based on customer needs,” said Amit Nayyar, President, Paytm.
Nayyar said the acquisition would make Raheja QBE the platform for Paytm to create various general insurance products, while leveraging Paytm Insurance Broking Ltd, set up in late 2019, to distribute products of other insurance firms on its platform.
“This acquisition will bring the capability of manufacturing insurance products which can be distributed through multiple channels including Paytm insurance broking. The general insurance will also distribute its products through other channels like aggregators, brokers and agents as well,” said Nayyar.
Prism Johson said in a regulatory filing that it expects the deal to be completed by March-end 2021 though it would be subject to approvals from the Insurance Regulatory and Development Authority of India (Irdai).
The acquisition will be made by QorQl Pvt. Ltd, a technology firm owned 51% by Sharma and the rest by Paytm (49%).
“Paytm might have chosen QorQl, an entity in which Vijay Shekhar Sharma is a primary shareholder to make this acquisition, since it wants to escape the narrative of a ‘Chinese company now investing in India’s insurance landscape, which may have caused challenges around approvals from the regulator,” said an analyst at a management consulting firm, requesting anonymity. Paytm’s Sharma earlier told Mint that the digital payments firm was bullish on a financial services execution strategy including insurance, wealth (through Paytm Money) and even banking, to outpace the impact on segments like travel and entertainment, from a revenue perspective.
In February 2018, Paytm established two new entities—Paytm Life Insurance Corporation Ltd and Paytm General Insurance Corporation Ltd to operate in the insurance space. Paytm says that currently it has no plans to apply for a life insurance licence.
“We continue to look for opportunities in the life insurance business and have no immediate plan to apply for license,” Nayyar said.
“…Our decision to sell our stake in Raheja QBE is in line with our mission to create sustainable shareholder value and will enable us to focus our resources on our core businesses,” said Vijay Aggarwal, managing director, Prism Johnson. It will be interesting to watch how Paytm continues to support its losses while scaling up the general insurance business, said Bhavik Hathi, managing director, Alvarez & Marsal (India), a management consultancy.