Some media reports noted that regulatory clarity is needed on foreign shareholding in insurance companies.
In an interview to CNBC-TV18, Rahul Khosla, MD, Max India, speaking on the development, clarifies whether holding companies’ foreign ownership would also be added into that category.
It may be recalled that a recent amendment has raised FII ownership in local insurance companies to 49 percent from 26 percent. The cap of 49 percent includes direct and indirect FDI as well as FPI.
Below is the transcript of Rahul Khosla’s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.
Ekta: Could you start by clarifying for us what exactly is the lack of clarity on in terms of foreign holdings within the foreign ownership category and if you could clarify if you have got any sort of clarity on the same?A: It is a bit unfortunate and unnecessary this sort of speculation that has been arrived since yesterday. Our position is very clear, our understanding of that position is that under the Insurance Regulatory and Development Authority (IRDA) rules which were framed in 2000 there was a calculation of foreign investment both direct and indirect in the Indian insurance company which means the subsidiary company. Those rules remain unchanged even after the notification that has just come. Just for the sake of clarity, I just wanted to express what our understanding is which is that any foreign investment in the Indian promoter for example MAX India of any insurance company for example in MAX life so the Indian promoter is MAX India and the subsidiary company is Max Life then any foreign investment will be counted on a proportionate basis towards the total foreign investment in MAX Life only if the foreign investor in the Indian promoter company which is MAX India also holds shares in the insurance company either directly or indirectly through its subsidiary and nominee.Basically, if the foreign investor in the Indian promoter company does not hold shares in the insurance company then that shareholding of such foreign investor will not be counted towards the total foreign investment in the insurance company, this is a very well established rule which was there since 2000. Our discussions so far with Ministry of Finance have basically indicated to us that this understanding still holds and it is quite logical. Really one doesn’t know why there is so confusion. Quite frankly our view is very clear and we would very much request and expect the government and the regulator to quickly clarify this so that all of this confusion is removed.
Ekta: As per what you have said right now, in any of your insurance businesses it would not be an issue if your foreign partner would want to raise their stake from 26-49 percent?A: That is correct, as I have said before even on this channel that first of all our partners Bupa have already expressed their desire to do exactly what you just said. We are in the process of filing all of the right applications with the Foreign Investment Promotion Board (FIPB). You may have known that just yesterday another company’s FIPB approval got approved; process got approved so we are going on that path. As far as the life insurance company is concerned, as I have always said, we are in very happy position of having the ability to choose the timing, the right partner and the right valuation.Ekta: With regards to Bupa increasing their stake to 49 percent as of now you haven’t seen any sort of regulatory hurdles? A: No, because our understanding for example of the rule that I just mentioned in terms of foreign shareholding.Ekta: When would the deal be completed?A: We were certainly expecting it over the next few months. We are right on the brink of filing our application so that should take place quite shortly.
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