Legendary investor Warren Buffett is keen on acquiring a majority stake in a state-owned general insurance company.
The Berkshire Hathaway chief executive, who is scheduled to visit India next year, is going to take up the issue with the Union government, sources involved with planning his visit next March told Business Standard.
At present, the rules do not allow the government to shed stake in the four public sector general insurance companies - New India Assurance, United India Insurance, National Insurance and Oriental Insurance.
Last week, Buffett had told shareholders that he did not rule out India as a possible investment destination for Berkshire investments. "The investments could be in companies or marketable securities, though bureaucratic obstacles could complicate any plans to invest, including limitations on foreign ownership," he said, adding that, "we've looked a lot at being in the insurance business in India". Insurance and reinsurance are Berkshire's main business lines.
Orissa-born Ajit Jain, widely seen as his successor at Berkshire Hathaway, runs the reinsurance business. So far, overseas investors have not set up an Indian reinsurance venture and have preferred to operate through liaison offices.
The sources added that Buffet's fallback option had been to set up a general insurance company in India or acquire a significant stake in an existing company. At present, the rules bar foreign investors from holding more than 26 per cent stake in an insurance company.
The government has proposed to increase the ceiling to 49 per cent, but that will not enable Buffett to have a majority control. He can, however, be the largest shareholder, with the remaining stake split between Indian players.
The government is not keen on selling stake in the general insurance companies either, though it was contemplating a merger a few months ago. While the proposal had come from the employees' unions a few years ago, the Centre did not make much progress on the issue. Last year, it had sounded out the public sector players as a long-term plan.
Besides, with the four companies making profits, thanks largely to the investment income, there is no immediate need to raise equity. Also, "with offices spread across the country, there is no need for major expansion," said an executive at a public sector company.
Among the four players, New India Assurance is the largest player and has traditionally had a strong focus on corporate lines, mainly due to the fact that it is headquartered in Mumbai, the country's business and financial hub.
However, of late, it has lost some of the accounts that have been with it for years, with Air India being a recent example.
