 "Life insurance industry sees 14.5% growth in April-September")
The government, on recommendation of the Foreign Investment Promotion Board (FIPB), has said the proposal of raising the foreign direct investment (FDI) in HDFC Life Insurance will need approval of the Cabinet Committee on Economic Affairs (CCEA).
However, it may not be the only venture requiring clearance from the CCEA.
Industry sources said clarity was sought from the CCEA on HDFC Life, which has a step-down subsidiary, HDFC Pension, a pension fund manager. While HDFC Life is an Indian-owned company, clarity has been sought on the ownership status of HDFC Pension.
According to the definitions by the FIPB in rules set out in February 2015, the foreign equity investment cap of 49 per cent is applicable to all Indian insurance companies.
Also, it would not allow the aggregate holdings by way of total foreign investment in their equity shares by foreign Investors, including portfolio investors, to exceed 49 per cent of their paid-up equity capital and also shall ensure that ownership and control shall remain at all times in the hands of resident Indian entities.
However, there is no clarity on what is the position of the government on this issue in pension fund managers. Hence, other life insurers with high FII holding in promoters and having pension subsidiaries may also need to go to the CCEA for a FDI hike nod.
“Those with high FII holding in their Indian parent and with a pension company as subsidiary may also need to approach the CCEA. Clarity on its position will be given before they can hike their stake,” said an industry official. The official added that while there was no opposition expected from the CCEA, the government wished to keep all related entities involved in this process.
Earlier, there was confusion on foreign holding. In promoters of insurance companies like HDFC clarity was sought on whether they were Indian or foreign entities because the FII ownership exceeded 75 per cent in some cases.
However, in August the department of financial services clarified that holdings of equity in an Indian promoter company by FIIs other than the foreign promoters of the applicant and their subsidiaries and nominees would not be part of FDI.
Amitabh Chaudhry, MD & CEO, HDFC Life, said that the application for an FDI hike had been sent for approval to the CCEA to seek some clarifications.
The Indian promoter is required to have at least 51 per cent stake in insurance ventures. Now, according to the new definition, this can include the FII stake. No such definition exists for the pension industry.
Once the CCEA nod comes through, the insurance company will need a final nod from the regulator and the Competition Commission of India before the stake hike goes through.
In August last year, Standard Life said it would buy 9 per cent additional stake in its Indian insurance venture HDFC Life, taking its holding to 35 per cent from 26 per cent. The foreign insurer was to pay Rs 1,705 crore for the nine per cent stake, valuing the company at Rs 18,951.4 crore.
However, it may not be the only venture requiring clearance from the CCEA.
Industry sources said clarity was sought from the CCEA on HDFC Life, which has a step-down subsidiary, HDFC Pension, a pension fund manager. While HDFC Life is an Indian-owned company, clarity has been sought on the ownership status of HDFC Pension.
According to the definitions by the FIPB in rules set out in February 2015, the foreign equity investment cap of 49 per cent is applicable to all Indian insurance companies.
Also, it would not allow the aggregate holdings by way of total foreign investment in their equity shares by foreign Investors, including portfolio investors, to exceed 49 per cent of their paid-up equity capital and also shall ensure that ownership and control shall remain at all times in the hands of resident Indian entities.
However, there is no clarity on what is the position of the government on this issue in pension fund managers. Hence, other life insurers with high FII holding in promoters and having pension subsidiaries may also need to go to the CCEA for a FDI hike nod.
“Those with high FII holding in their Indian parent and with a pension company as subsidiary may also need to approach the CCEA. Clarity on its position will be given before they can hike their stake,” said an industry official. The official added that while there was no opposition expected from the CCEA, the government wished to keep all related entities involved in this process.
Earlier, there was confusion on foreign holding. In promoters of insurance companies like HDFC clarity was sought on whether they were Indian or foreign entities because the FII ownership exceeded 75 per cent in some cases.
However, in August the department of financial services clarified that holdings of equity in an Indian promoter company by FIIs other than the foreign promoters of the applicant and their subsidiaries and nominees would not be part of FDI.
Amitabh Chaudhry, MD & CEO, HDFC Life, said that the application for an FDI hike had been sent for approval to the CCEA to seek some clarifications.
The Indian promoter is required to have at least 51 per cent stake in insurance ventures. Now, according to the new definition, this can include the FII stake. No such definition exists for the pension industry.
Once the CCEA nod comes through, the insurance company will need a final nod from the regulator and the Competition Commission of India before the stake hike goes through.
In August last year, Standard Life said it would buy 9 per cent additional stake in its Indian insurance venture HDFC Life, taking its holding to 35 per cent from 26 per cent. The foreign insurer was to pay Rs 1,705 crore for the nine per cent stake, valuing the company at Rs 18,951.4 crore.
