Auto firms eyeing insurance sector

MUMBAI, AUG 21: With the opening up of insurance sector, Indian automobile companies are all geared up for launching their own insurance o...

MUMBAI, AUG 21: With the opening up of insurance sector, Indian automobile companies are all geared up for launching their own insurance outfits. While Bajaj Auto and Ashok Leyland have already started looking out for partners to enter the lucrative insurance arena, others like Hero Honda and Mahindra and Mahindra (M&M) are adopting a wait-and-watch policy.

If implemented, insurance would be the first major foray of the two-three wheeler major Rs 3,810-crore, Bajaj Auto which has over Rs 3,500 crore as extra cash in its balance sheet. “We have already started hiring people for our insurance outfit and we are looking for a joint venture partner. Even if we do not get any partner, we will go ahead with our plans,” top Bajaj officials said.

Though there is no synergy between the existing businesses of the auto companies with the recently opened insurance sector, auto companies are planning to use their vast sales and distribution network around the country to make a foray into the segment. “We’ve presence in almost all the cities in the country. We are currently evaluating both life and general insurance for the possible entry,” Bajaj officials said.

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On the other hand, the Hindujas have decided that their flagship company in the country, Rs 2,600-crore Ashok Leyland, makers of commercial vehicles will lead the group’s entry into the insurance sector. “We are optimistic about the industry and looking at all the options,” Hindujas officials said. The group has already made significant investments in the growing ICE (infotech, communications and entertainment) sector and is on the verge of buying several dotcom sites.

Since the insurance sector has been opened up last week after a decade long debate, FMCG major Dabur and ICICI-Prudential have already made their applications for a licence to the insurance sector regulator IRDA. The sector has already invited interests from the top Indian as well as international companies.

Both the auto firms are setting up independent teams to enter the industry by taking advantage of the existing network of the parent company. While both the companies are planning to enter a new segment, both are facing increasing pressure on margins in their main line of business. While Ashok Leyland has seen its sales graph of commercial vehicles going down due to general recession, Bajaj Auto has seen its scooter sales falling to new lows as consumers are buying more motorcycles.

Even utility vehicle major Mahindra and Mahindra (M&M) which has entered the infotech sector in a big way is toying with the idea to launch its own insurance outfit. Though the company officials did not confirm any possible entry into the sector, insiders say they are looking at all the new opportunities.