Insurance cos see no need to hike FDI now

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Insurance cos see no need to hike FDI now

The government may be lobbying hard with its Left allies for a hike in FDI in insurance to 49%, but Indian insurance companies who have been doubling their business every year, are no longer pushing for it, reports CNBC-TV18.

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The government may be lobbying hard with Left allies for a hike in FDI in insurance to 49%, but Indian insurance companies who have been doubling their business every year, are no longer pushing for it, reports CNBC-TV18.

Till a year ago, a hike in FDI was the biggest demand from Indian insurance companies. Finance Minister P Chidambaram obliged and proposed a hike in the limit from 26% to 49% in last year's budget. And since then, the government is struggling to amend the Act owing to resistance from its crucial Left allies.

But the times have changed and Indian promoters are hardly pushing for a hike in FDI now. On a query related to the same, KV Kamath, CEO and MD of ICICI Bank , who is also the Chairman of India's largest private sector insurance company, said, "To be very honest no, it is not very critical for our plans. We are in a partnership and have to respect it. Indian companies have become very competent to run these businesses themselves. And they have a better way of resolving Indian challenges."

Kamath is not alone. A clutch of insurance companies that CNBC-TV18 spoke to, echo the same view. Indian insurance companies are growing rapidly and have attracted huge valuations even though they are all unlisted. Indian promoters feel they much rather offload shares to the public including the FIIs, than to their foreign partners.

They will however need a hike in foreign investment to accommodate FIIs. ICICI Prudential Life has been valued at Rs 25,000 crore and other insurance companies are all getting themselves valued for an impending float. Clearly, a hike in FDI at this point of time will benefit the foreign partners more than the Indian promoters.

Chairman, Max New York Life, Analjit Singh says, "For the company, FDI is important in number two space in the sense, that the company is poised to grow significantly with or without FDI. But obviously, it makes New York Life's interests more active if the matter of FDIs is resolved. NYL would much prefer to be a 49% partner and that's our agreement with them, so overall it should not impact the growth of the company beyond a point."

Thanks to strong internal growth, capital, the main pull for indian promoters towards foreign investment in the initial years, is no longer an issue.

 Director, Birla Sunlife, SK Mitra says, "As far as Indian partners are concerned, I don't think it matters very much because we are captializing our companies and companies are drawing more capital than earlier estimated. Business is growing at a faster pace and potential is much more that expected. We have already put in Rs 600 crore."

Life seems to have come a full circle for Indian insurance companies. The shrill cries for more FDI have faded away. Thanks to the scorching pace of growth, which perhaps even they never anticipated. It now remains to be seen whether foreign partners will be able to lobby hard enough for a hike in FDI.