Paytm, India’s most valuable startup, and its co-founder and chief executive, Vijay Shekhar Sharma, announced on Monday they have reached an agreement to acquire insurance firm Raheja QBE for a sum of $76 million as the financial services startup looks to tap the nation’s booming insurance market.
Sharma is acquiring Raheja QBE through QorQl Pvt. Ltd, a firm in which he owns majority stake with Paytm owning the remainder. A Paytm spokesperson told TechCrunch that it was an all-cash deal.
Raheja QBE, which offers insurance services to cover an individual’s health, home, vehicles, and also provides protection on commercial properties, and workplace injuries, is owned by Prism Johnson (51%) and QBE Australia (49%.) QorQl is acquiring a 100% stake in Raheja QBE as part of the agreement, the two entities said.
Paytm, whose services are used by tens of millions of Indians each month, said the acquisition will help it “democratize general insurance services” in the country. Mumbai-headquartered Raheja QBE has amassed over 41,000 customers, and sold 69,000 new policies in the financial year that ended in March this year.
Raheja QBE’s “strong management team will help us accelerate our journey of taking insurance to the large population of India with the aim to create a tech-driven, multi-channel general insurance company with innovative and affordable insurance products,” said Amit Nayyar, President of Paytm, in a statement.
In India only a fraction of the nation’s 1.3 billion people currently have access to insurance and some analysts say that digital firms could prove crucial in bringing these services to the masses. According to rating agency ICRA, insurance products had reached less than 3% of the population as of 2017.
An average Indian makes about $2,100 in a year, according to World Bank. ICRA estimated that of those Indians who had purchased an insurance product, they were spending less than $50 on it in 2017.
In recent years, scores of startups and established banks have launched products to win this market. For Paytm, which runs a range of businesses including a digital bank and online lending, sachets of insurance could fit well in its overall offerings.
“This move will help the insurance business scale up to new heights by leveraging the large customer base and innovative products offered by Paytm,” said Vijay Aggarwal, Managing Director of Prism Johnson, in a statement.
Raheja QBE’s acquisition is subject to customary conditions, including approval from the Insurance Regulatory and Development Authority of India (IRDAI), the two firms cautioned.