The ING group wants to raise its stake in the Bangalore-based Vysya Bank via its subsidiary, Bank Brussels Lambert (BBL), because any sale of the stake of the chief promoter of the Indian bank, the South-based GMR group, could jeopardise the insurance joint venture, ING Vysya Life Insurance Company, officials at ING Bank said.
The insurance venture is a partnership between Vysya Bank (49 per cent), ING (26 per cent) and the GMR group (25 per cent).
ING is keen to increase its holding in the bank via the foreign direct investment route to the maximum permissible level or to the extent that the GMR group wants to sell equity. Should another entity buy the GMR group's 28.1 per cent holding in the bank, the insurance joint venture could be in jeopardy if the new entity has no interest in insurance or already has interests in insurance through other ventures, bank officials said.
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The GMR group is understood to be keen to sell at least part of its 28.1 per cent stake in the bank as it intends to concentrate on its core activities of construction and power plants, said officials. At the same time, the GMR group has indicated that it wishes to retain its 25 per cent holding in the insurance venture, and would not sell its stake in the bank arbitrarily to anyone.
The GMR group has a presence in infrastructure and construction, having built two power projects in the country, including India's first barge-based power plant. According to the agreement between GMR and ING, the Netherland-based bank has the first right of refusal to increase its stake in Vysya Bank from 20 per cent (through BBL).
"We have been talking to the GMR group and saying that we would like to increase our shareholding in Vysya Bank subject to regulatory approvals from the Reserve Bank of India and the Foreign Investment Promotion Board (FIPB)," said ING Vsyaya Life Insurance officials.
Implications for the future
Freny Patel & Sidhartha in Mumbai/New Delhi
IF the Netherland-based ING Bank succeeds in increasing its stake in the Indian insurance joint venture through BBL, it will open the doors for other foreign insurance companies to hike their stakes from the present permissible ceiling of 26 per cent.
BBL will shortly be merging into ING and so ING will have a higher stake in the insurance venture through its direct 26 per cent holding as well as BBL's indirect holding, which is currently 20 per cent.
Top Insurance Regulatory and Development Authority (IRDA) officials said that they would wait for the Reserve Bank of India to identify the new holding pattern in Vysya Bank, before taking any view on the issue.
IRDA sources, however, pointed out that as in the case of HDFC-Standard Life Insurance Company, the foreign equity holding in ING Vysya Life Insurance Company would have to be reduced once Bank Brussels Lambert (BBL) increases its stake in the Bangalore-based bank.
Standard Life has an 18.3 per cent holding in HDFC Standard Life Insurance Company as it already has a 10 per cent stake in the Indian parent body, Housing Development Finance Corporation. In the case of ING Vysya Life, IRDA allowed ING to hold a 26 per cent stake in the insurance venture though it had an indirect stake in Vysya Bank through BBL.
ING Vysya Life Insurance officials admitted that the extent to which the FIPB dimension would affect the insurance company is not known today. ING has yet to approach the IRDA on the issue.
Senior officials however, are of the view that ING increasing its holding in Vysya Bank through BBL would be considered an indirect holding and hence would not affect ING's 26 per cent stake in the joint venture.
Industry experts however, feel otherwise, stating that it could open up a Pandora's Box and nullify the earlier maximum foreign equity holding of 26 per cent.