Anil Ambani group firm Reliance Life, which recently announced selling 26% stake to Japanese insurer Nippon for $680 million, will have to seek government nod, said the Insurance Regulatory and Development Authority (IRDA).
Under the Insurance Act, promoters wanting to sell 26% stake (maximum permissible limit), could offload their equity only after 10 years into operations. However, Reliance Life has not yet completed 10 years of operation.
Asked whether Reliance Life can sell its 26% stake currently, IRDA Chairman J Hari Narayan said it could not be done without approval of the government. "Not without the order of the government," he told PTI.
When contacted, a spokesman of Reliance Capital, which owns Reliance Life, said, "We are confident of receiving necessary approvals from the government, IRDA, RBI for the largest ever proposed FDI of Rs 3,000 crore in financial service sector in India".
IRDA chairman on his part said Reliance Life is in touch with the insurance watchdog over the issue and the company has to approach the government for approval.
The company will have to do so on its own, Hari Narayan said.
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Reliance Capital wholly owns Reliance Life, a business it acquired from AMP Sanmar in 2005. AMP Sanmar started operation in January 2002. Thereby Reliance Life would complete 10 years of operations in January next year.
Earlier this month, Reliance Capital announced that Japanese insurance firm Nippon Life Insurance Company will acquire 26% stake in Reliance Life Insurance for $680 million.
"Nippon Life Insurance will invest an aggregate value of Rs 3,062 crore ($680 million) to acquire a 26% strategic stake in Reliance Life Insurance," the Anil Ambani Group firm had said in a statement.
The transaction pegs the total valuation of Reliance Life Insurance at approximately Rs 11,500 crore ($2.6 billion).
Nippon is the sixth-largest life insurer in the world and the No.1 private life insurer in Asia and Japan.
Reliance Life claims to be the largest insurer amongst the 22 private life insurers in India in terms of the number of individual policies sold.
The company has sold over 7 million policies through its network of nearly 1,250 offices and over 2,15,000 advisors.
Reliance Life managed assets of over Rs 17,000 crore ($3.7 billion) as on December 31, 2010.