The proposed merger of Reliance General Insurance and Royal Sundaram Alliance has hit a roadblock, with differences over valuation.
According to persons with knowledge of the issue, both firms have failed to reach an agreement on the valuation of Reliance General. Reliance General reckons that its valuation is well over Rs 2,000 crore, but this has been disputed by the Chennai-based Royal Sundaram Alliance. Both the companies are likely to inform the regulator that the merger, in the form currently proposed, may not go through, they said on condition of anonymity.
According to persons with knowledge of the issue, both firms have failed to reach an agreement on the valuation of Reliance General. Reliance General reckons that its valuation is well over Rs 2,000 crore, but this has been disputed by the Chennai-based Royal Sundaram Alliance. Both the companies are likely to inform the regulator that the merger, in the form currently proposed, may not go through, they said on condition of anonymity.
The original proposal had envisaged the foreign promoter of Royal Sundaram — Royal Sun Alliance of UK — would continue to hold 26% in the merged entity. Reliance Capital now owns 100% stake in Reliance General while the South-based Sundaram group owns 74% in Royal Sundaram Alliance, with the rest being held by the RSA group.
The RSA group has been looking at expanding its operations in Asia after its exit from the US in 2007. Reliance General Insurance, on the other hand, has been substantially scaling down its business in its pursuit of underwriting profits. A merger of this sort would have allowed Reliance General to regain the size and also a substantial motor insurance business.
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