The Shiv Nadar-controlled HCL Group is in advanced discussions with real estate major DLF to acquire a substantial stake in DLF Pramerica Life Insurance Company Limited, for around Rs.450 crore in a two-phase transaction.

The acquisition will be done through a privately-held company and will represent Nadar's first diversification outside the IT business. Nadar set up HCL in 1976 and the two listed IT companies of the group - HCL Technologies and HCL Infosystems - have a combined market capitalisation of Rs.35,828 crore or $8 billion.

While spokespersons for both HCL and DLF declined comment, a person with direct knowledge of the talks said the HCL group company will first acquire a 44% stake in the insurance joint venture by buying fresh shares of the company and at a later stage, buy out DLF's residual 30% stake in the company, subject to approval of regulator Irda.

Regulatory Hurdle

At present, DLF holds 74% stake in the joint venture with Prudential Financial, the second-largest life insurer in the US, holding the remaining 26%. DLF's share holding in the insurance joint venture will fall to 30% after HCL's investment.

The transaction could face a possible regulatory hurdle as current guidelines stipulate that the original partner in a life insurance joint venture cannot sell its stake in the company during the first ten years of operations.

Last month, Reliance Industries announced that it was buying Bharti's entire stake in Bharti AXA Life Insurance, and if the insurance regulator gives the goahead for that sell-off, it will smoothen the way for this transaction as well. "Given an option, DLF would like to sell its entire holding in shot," said the person involved in the transaction.