Global insurance majors are liberally picking up stakes in the group companies of their Indian partners.
In a latest development, the Canada-based Lombard Insurance Company picked up seven per cent stake in ICICI Bank today at Rs 130.
This takes Lombard's stake to eight per cent in the bank. Prudential Plc, the foreign life insurance partner of ICICI Prudential Life Insurance also picked up an additional one per cent stake in the private sector bank at a similar price, taking its holding to around four per cent.
Off late, India has become an attractive investment destination for many global insurance companies, especially those which have joint ventures in the Indian insurance sector. UK-based Standard Life Insurance Company has a 10 per cent holding in Housing Development Finance Corporation (HDFC).
However, it has paid a price for this, as it cannot have more than 18.6 per cent stake in the insurance joint venture -- HDFC Standard Life Insurance Company -- unless it decides to decrease its holding in the housing finance company.
The Netherlands-based ING Group holds around 44 per cent in Vysya Bank. It had recently enhanced its stake in the private sector bank from the earlier 20 per cent, in order to protect its interests in the insurance joint venture -- ING Vysya Life Insurance Company.
Unlike Standard Life Insurance, ING did not have to bring down its holding in the insurance venture as the bank itself decided to bring down its stake.
Despite both ICICI Bank's foreign insurance partners -- Lombard and Prudential having stakes in the bank, neither will have to bring down their holding in the insurance joint ventures, as these are seen as foreign institutional investments and not strategic investment.
Said representatives from the foreign global insurance partners of ICICI Bank: "Increasing our holding in the bank is a pure investment decision, and not a strategic investment."
"Prudential picking up additional stake in the bank reflects a greater alignment between the two partners, and strengthens the relationship," said ICICI Prudential Life Insurance Company managing director Shikha Sharma.
This comes at a time when some of the global insurance companies are under financial pressure following the mounting losses post September 11 and the floods in Europe.
At the same time, with the exception of ING's stake in Vysya Bank, none of the other equity investments made by global insurers reflect any move by foreign partners to take a strategic stake in group concerns. This is reflected in terms of most of the holdings being routed through the FII route and not the foreign direct investment route.
