(Reuters) -India’s Mahindra & Mahindra will form a life insurance joint venture with Canada’s Manulife, expanding an existing 5-year old partnership, with both companies committing up to $400 million over the next decade.
The joint venture marks Manulife’s entry into one of the world’s fastest growing insurance markets, the size of which is projected to more than double to 25 trillion rupees ($125.15 billion) by 2030, according to a report by McKinsey and Insurance Brokers Association of India.
Despite robust industry growth, insurance penetration in the country is still low, especially in rural and semi-urban areas.
Only 2% of the country’s life insurance branches are in India’s rural areas, Mahindra said in a presentation.
For Mahindra, which already has a vast retail lending business through Mahindra & Mahindra Financial Services, the foray marks a “logical extension”, the company said.
The venture will deepen the partnership between the two companies, which began with the launch of Mahindra Manulife Investment Management in 2020.
The joint venture is expected to break-even in about 10-12 years, Mahindra Group CEO and Managing Director Anish Shah told investors on a call, adding operations would begin in 15 to 18 months.
Each firm will invest $140 million in the first five years, they said on Thursday.
Shares of Mahindra traded 0.7% lower as of 11:37 a.m. IST.
Mahindra will fund the joint venture through its financial services arm and allocate one-third of the dividend it receives from Mahindra & Mahindra Financial Services for the business, Shah said.
The company will apply for an insurance licence in the next two to three months, he said.
($1 = 87.8950 Indian rupees)
(Reporting by Kashish Tandon, Ananta Agarwal and Meenakshi Maidas in Bengaluru; Editing by Mrigank Dhaniwala and Ronojoy Mazumdar)
