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Financial services firm Edelweiss Capital on Monday inked a joint venture agreement with Japanese insurer Tokio Marine Holdings to enter into the Indian life insurance space.
The JV, Edelweiss Tokio Life Insurance, will soon apply to the Insurance Regulatory & Development Authority to get its nod to start operations, which may take eight months to one year time from now, Edelweiss Capital's Chairman Rashesh Shah said.
"Edelweiss will have 74 per cent stake in the JV and the remaining with Tokio Marine Holdings. The proposed venture will have Rs 550 crore (Rs 5 billion) paid-up equity capital to start with," Shah said.
TMH has a net worth of $18.4 billion and revenues of $39 billion in FY09. Apart from life insurance, where the 138-year old company entered in 1996, TMH has presence in general insurance and asset management sectors among other areas of financial services.
The Japanese major might increase its stake in the JV to 49 per cent as soon as IRDA hikes the Foreign Direct Investment limit in the life insurance sector, Shah said.
TMH had entered into the Indian general insurance space in 2000 partnering with IFFCO. Shah said that ETLI would seek opportunities in urban metros, Tier-II and Tier-III cities and bring out endowment, ULIPs, annuity and other products to cater to the sector.
"We will target all these markets since potential is there in all of them to grow. However, apart from the traditional products, there will be products which are unique in nature," Shah said.
"Since we have eight months to one year time to start operations, we will devise plans and come out with products that will suit the market," he added.
The Indian insurance sector is getting over Rs 200,000 crore (Rs 2,000 billion) premium a year and has the potential to grow three-four times in the next eight to ten years, Shah said to justify the entry of the company in the sector, where the state-owned Life Insurance Corporation of India is holding the lion's share.
"Out of this Rs 200,000 crore (Rs 2,000 billion), around Rs 40-50,000 crore comes through the private players. So, we think, there is an opportunity for us," he said.
Acknowledging the advantage of early birds, Shah said that a late-entrant also reaps some benefit as "lot of intelligence is available".
More than 20 companies are currently operating in the life insurance space in the country.
Shah said that ETLI would appoint 40-50 people in the project team initially and add to that count as and when it gets the approval from the IRDA.
Tokio Marine Holding's Managing Director Hiroshi Endo said after venturing into the general insurance space, the company had been waiting for a right partner to enter into the life insurance space and Edelweiss met all the criteria like, strong financial capital base and strong brand equity to become a partner.
"I have no doubt that the JV will contribute to the growth of the Indian insurance industry by way of providing quality products and services," Endo said.