FIPB no to FDI in ICICI holding co...

The Foreign Investment Promotion Board (FIPB) of the finance ministry today rejected ICICI Bank's proposal to sell 24 per cent in ICICI Financial Services, the holding company for its insurance and asset management ventures, to foreign investors.

FIPB rejected the proposal on the grounds that it did not comply with the 26 per cent cap on foreign direct investment (FDI) in insurance ventures, government sources said.

ICICI Bank's life and non-life insurance companies, market leaders among private companies, have 26 per cent equity from Prudential and Lombard, respectively.

Firms like Goldman Sachs, General Atlantic, Government of Singapore Investment Corporation (GIC), Temasek and Crown Capital have expressed an interest in buying 5.9 per cent in ICICI Financial Services for Rs 2,650 crore, valuing the company at Rs 44,600 crore.

FIPB's rejection contradicts the view of the finance ministry's insurance division and the Insurance Regulatory and Development Authority (IRDA) that FDI in ICICI Bank's proposed holding company would not violate norms.

The insurance division and IRDA had said the proposal would not violate current FDI norms because the foreign partner of the holding company was not the same as the foreign partner in the insurance ventures.

The decision on ICICI Bank's proposal is of significance for other insurance companies looking to expand foreign equity participation to raise much-needed capital for business expansion.

Most insurance companies are waiting for the passage of the amended Insurance Act, 1938, by Parliament, which is expected to raise the foreign equity limit to 49 per cent.

Additional reporting with ASIT RANJAN MISHRA & PRASHANT K SAHU