Insurance FDI cap hike results in cash inflow in JVs
The long pending demand of insurance players for raising the FDI cap to 49 per cent was fulfilled this year leading to greater flow of foreign funds into India’s private JVs and the move is expected to further attract over Rs 6,000 crore into the sector during 2016.business Updated: Dec 31, 2015 01:34 IST
The long pending demand of insurance players for raising the FDI cap to 49 per cent was fulfilled this year leading to greater flow of foreign funds into India’s private JVs and the move is expected to further attract over Rs 6,000 crore into the sector during 2016.
The Insurance Laws (amendment) Bill was passed by Parliament in March clearing decks for foreign entities to increase their stake in private sector insurance companies to 49 per cent from earlier ceiling of 26 per cent.
Soon after the law took effect, foreign investors started ploughing capital into their Indian joint ventures, raising their equity holdings.
Companies including AXA of France, Bupa of Britain, Nippon Life Insurance of Japan announced raising stake in their respective joint venture.
AXA raised stake in both life and non-life insurance ventures with Bharti Enterprises, leading to foreign capital inflow of about Rs 1,300 crore.
Japans Nippon Life Insurance too announced the acquisition of another 23 per cent stake in Reliance Life Insurance for about Rs 2,265 crore. At the same time, Bupa also announced to raise its stake to 49 per cent stake in Max Bupa Health Insurance for Rs 191 crore.
The Netherlands based Ageon has also increased its stake in life insurance venture Aegon Life Insurance Company to 49 per cent.
Going forward, more than a dozen foreign companies including BNP Paribas Cardif, Insurance Australia Group, Aviva Plc, Standard Life Plc, AIA, QBE Insurance Group and Fairfax Financial Holdings of Canada are expected to raise stakes in their ventures.
Mitsui Sumitomo Insurance Company Ltd of Japan also proposed to increase stake to 40 per cent from 26 per cent in Cholamandalam MS General Insurance Company Ltd for consideration of about Rs 883 crore.
As many as 10 insurance companies have applied for regulatory clearances to bring in foreign investment of Rs 6,192 crore. They have applied to insurance regulator IRDAI and Foreign Investment Promotion Board (FIPB).
According to Insurance Regulatory and Development Authority of India, the total FDI in insurance sector as on March 31, 2015, was about Rs 8,031 crore.