Baba Ramdev's Patanjali Ayurved, a prominent Indian consumer goods company, has made its foray into the general insurance industry through the acquisition of a majority stake in Magma General Insurance. According to the agreement, Patanjali Ayurved and DS Group, the maker of Rajnigandha, will purchase Magma General Insurance from Sanoti Properties LLP for a valuation of Rs 4,500 crore.
This strategic move will see Patanjali Ayurved become the main promoter entity for Magma General Insurance, potentially altering the competitive landscape of the Indian insurance sector. This development is anticipated to broaden Patanjali's business offerings beyond its traditional focus on wellness, personal care, and food products.
Commenting on the recent acquisition, Beshak Founder Mahavir Chopra noted after Jio, owned by Mukesh Ambani, Chairman of Reliance Industries Limited, LIC and now Baba Ramdev is entering general insurance.
In a post on X, Chopra wrote: "Patanjali is buying an insurance company. Poonawala (Magma) sells its shareholding in Magma General Insurance to Patanjali. Interesting times - Jio, LIC and now Baba Ramdev are entering general insurance."
Details of the deal
The majority ownership of Magma General Insurance is held by Sanoti Properties LLP, a company jointly owned by Adar Poonawalla and Rising Sun Holdings Pvt Ltd.
Sanoti Properties, owned by Adar Poonawalla, has authorized the sale of its insurance subsidiary, Magma General Insurance (previously known as Magma HDI General Insurance Company), along with Celica Developers and Jaguar Advisory Services. This decision was made in accordance with the terms of the share purchase agreement with Patanjali Ayurved and DS Group.
The transaction is valued at Rs 4,500 crore and is contingent upon obtaining regulatory approvals.
Magma General Insurance, formerly known as Magma HDI General Insurance Company Ltd, provides a wide range of insurance products in various categories to protect against major risks in the general insurance sector.
In FY24, the company achieved a Gross Written Premium of Rs 3,295 crore and is projected to achieve approximately Rs 3,650-3,700 crores of Gross Written Premium in FY25, along with a Profit Before Tax of Rs 20-25 crore.
Magma General Insurance could benefit immensely from Patanjali's ability to infuse growth capital, huge distribution strength including access to rural markets as Patanjali Ayurved products are available at 2,00,000 counters, national level chains including Reliance Retail, Hyper City, Star Bazaar and 250 Patanjali Mega Stores, a Patanjali spokesperson added.
Adar Poonawalla, Founder of Senoti Properties, said: “We are proud that over the last few years, Magma General Insurance has built up its business carefully, both on the retail and corporate side, with over 18,000 agents, more than 2,000 corporates, 14 OEMs including all the large OEMs, and more than 80 players in the financial services business. It has delivered a growth rate of 26% over the last 5 years. We are confident that it will continue to make a strong contribution to the general insurance industry, under the new ownership of Patanjali Ayurved and the DS Group.”
Indian insurance sector
The Insurance Regulatory and Development Authority of India (IRDAI) has taken a mission-focused approach to make 'Insurance for All' a reality by 2047. In order to support the industry in reaching this goal, IRDAI is revising its regulations. Recently, the government proposed a bill to permit 100% foreign direct investment in the insurance sector, which is expected to enhance competition and bring in advanced expertise and international best practices. Additionally, the regulator is considering issuing numerous licenses to private insurers to further promote growth and innovation in the sector.
During the fiscal year ending in 2024, the premium income of non-life insurance companies surged by 19.5% compared to the previous year, reaching Rs. 1,14,972 crore (US$ 13.8 billion). The increase in revenue was primarily fueled by the demand for health, motor, and crop insurance products. The total number of non-life insurance policies rose from 253.1 million in FY22 to 301.8 million in FY23.
In the 2022-23 period, the Indian non-life insurance industry recorded a total direct premium of Rs. 2.57 lakh crore (US$ 30.77 billion), marking a growth of 16.40% from the previous year. This substantial growth in the sector can be attributed to factors such as the expanded presence of private insurers, technological advancements, introduction of new insurance products, enhanced distribution channels, and operational efficiencies.