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Paytm levels up its insurance play by acquiring Raheja QBE

Paytm forayed into insurance in 2018 and has been trying different approaches to expand its presence ever since.

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One97 Communications-owned digital payment company Paytm, and its founder and chief executive, Vijay Shekhar Sharma, who has been trying to expand the company’s presence in the online insurance space for over two years, said Monday, they will acquire a 12-year-old general insurance company, Raheja QBE, for USD 76 million.

With the acquisition, the Noida-headquartered company, valued at USD 16 billion, has taken its insurance play to the next level.

Raheja QBE is a joint venture between India’s Rajan Raheja Group-owned Prism Johnson, and QBE Insurance, Australia’s second-largest insurer. Prism Johnson, a building materials company, holds 51% stake in the entity, while QBE Australia owns the remaining shares.

The acquisition will be carried through QorQl Pvt. Ltd, a five-year-old entity in which Sharma owns a stake of 51%, while Paytm owns the remaining 49%, a report by local media Economic Times (ET) said, citing sources. According to a Techcrunch report, the transaction is likely to be an all-cash deal.

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Amit Nayyar, president of Paytm, in a statement, said Raheja QBE’s strong management team will help the company accelerate its journey of taking insurance to the large population of India, and that the aim is to create a tech-driven, multi-channel general insurance company with innovative and affordable insurance products.

For Paytm, the deal is one step toward its larger goal of becoming a full-fledged financial services provider. The company first forayed into the segment in February 2018 when it registered two new insurance entities: Paytm Life Insurance Ltd. and Paytm General Insurance Ltd. It was just a month after Sharma announced setting up an investment and wealth management division, Paytm Money Limited, as a wholly-owned subsidiary of One97 Communications.

However, until earlier this year, the company acted as a marketplace for insurance products. In March 2020, its six-month-old subsidiary, Paytm Insurance Broking, obtained a brokerage license from the sector regulator Insurance Regulatory and Authority of India (IRDAI). The company, at the time, said it would partner with insurance firms to roll products across auto, health, and life. According to the ET report, its insurance brokerage arm would continue to sell products in tie-ups with other companies on its platform.

Parallelly, in April, Sharma made Vineet Arora, former managing director and CEO of Aegon Life Insurance, as the managing director and CEO of Paytm General Insurance.

Paytm is now trying to streamline its insurance business. According to sources cited by ET, Pankaj Arora, the current CEO of Raheja QBE General Insurance will continue to lead the business with Nayyar, who is also a director at QorQl, and Arora will oversee the new venture’s expansion.

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While Paytm had been trying to expand organically in the insurance space, it seems to have realized that the process was taking too long and that the better approach would be to grow inorganically.

“We took the acquisition route to accelerate our journey into general insurance. This would help us save between 24-30 months,” a Paytm spokesperson told ET. “The company’s strong management team would also help us in a faster expansion of the insurance business.”

With the acquisition of Raheja QBL, Paytm has positioned itself in a different league altogether. The move follows the acquisition of DHFL General Insurance by Flipkart co-founder and former CEO Sachin Bansal for around INR 100 crore (USD 13.3 million), in January 2020.

“This move will help the insurance business scale up to new heights by leveraging the large customer base and innovative products offered by Paytm,” Vijay Aggarwal, managing director of Prism Johnson, said in a statement.