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Oct 05, 2012, 05.53 PM IST
Keki Mistry, vice chairman and chief executive officer, HDFC told CNBC-TV18 that the slew of reforms announced the government are very positive and have helped India avoid the possibility of a downgrade.
"The implication of a downgrade would have been terrible, because interest rates would have gone through the roof, the currency would have collapsed and confidence would have really taken a beating," he elaborated.
The government hiked foreign investment ceiling in the insurance sector to 49 per cent from the present 26 per cent. With the Cabinet approving the proposal , the Insurance Laws (Amendment) Bill is likely to be taken up by Parliament for passage in the forthcoming Winter Session.
Mistry informed, HDFC’s insurance arm HDFC Standard Life will definitely consider it if the Parliament approves the bill. "We have an agreement with Standard Life that enables them if they wish to increase their stake in the insurance company at a fair value," he added.
Below is the edited transcript of Mistry's interview with CNBC-TV18.
Q: How will the institutional holding pattern look like post the Carlyle deal?
A: Nothing changes much. Carlyle had about 3.7 percent odd of the shares. They sold 3.7 percent and a significant portion of that 3.7 percent if we believe has been bought by foreigners. Effectively, what it means that the FDI shareholding comes down, the FII shareholding goes higher.
But other than that, it won’t make too much difference. My reckoning is that the FII shareholding in HDFC now will be around 71-72 percent. We have to wait for the details from the registrar before we can be sure of the percentages.
Q: What have you made of the slew of reforms that have been announced overnight?
A: Very positive. These reforms were so very, very necessary particularly in the context of the fact that as we were looking at the early part of September, India was actually looking at that possibility of a downgrade. The implication of a downgrade would have been terrible, because interest rates would have gone through the roof, the currency would have collapsed and confidence would have really taken a beating. It was necessary for the government to come out with these reforms.
It started sometime in the middle of September with the increase in the diesel prices and the cap on the LPG cylinder. All are very, very positive. The spate of reforms that we have seen a subsequent to that, a little bit of that is making up for lost time, but it has improved sentiment dramatically in the system.
It is not just the reforms that you are seeing in the system that is important, what is more important is the fact that the Finance Ministry is actually interacting with players in the market, talking to banks, insurance companies and mutual funds to understand what the issues are, so those issues can be addressed.
That is more positive in terms of actual delivery of performance rather than just the big bang reforms that we are talking about which are very good from a sentiment perspective. For example, insurance still needs to get parliamentary approval. We got to wait and see whether the parliamentary approval happens in the December session or not.
Q: How will HDFC Life Insurance itself utilize this increased FDI that they can now avail of?
A: HDFC Standard Life would definitely look at the FDI in insurance. We have an agreement with Standard Life that enables them if they wish to increase their stake in the insurance company at a fair value.
Once the bill gets passed Standard Life will have to take a call to decide whether they want to go up to full limits, or they want to go up to a certain extent. That’s the call they will have to take.
May 22 2013, 13:11
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