Private life insurance players do not see a case for hiking foreign direct investment in the sector from the current 26 per cent.
Many have indicated apprehension and reluctance to divest additional stake to their foreign partners following the Centre's proposal to hike FDI to 49 per cent.
The views were articulated at Business Standard's insurance round-table held last Saturday at Taj Mumbai.
"Capital has not been a constraint to growth as both partners have the ability to bring in the requisite capital," said Shikha Sharma, CEO, ICICI Prudential Life.
The industry has, however, been lobbying for higher FDI ceiling. Since the sector was privatised in December 2000, the private industry started with an initial capital of Rs 800 crore (Rs 8 billion), which has since then increased to Rs 3,600 crore (Rs 36 billion) for life and Rs 2,500 crore (Rs 25 billion) for non-life.
More than the need for capital to the grow the business, Indian CEOs are concerned over the control foreign partners will have once they hike their stakes.
"All foreign players are keen to raise their stakes. What will happen to the Indian promoter who has to divest his holding to 26 per cent by virtue of the provision of the Irda Act," questioned S Krishnamoorthy, CEO, SBI Life.
Deepak Satwalekar, managing director, HDFC Standard Life, is however, confident that there won't be any anti-nationalists people in Parliament requiring an Indian company to hand over control to the foreign promoter in the 10th year.
S B Mathur, chairman, LIC, further pointed the need for uniformity in regulations pertaining to the financial services sector. These today vary immensely between banking, mutual fund and insurance industries, with norms on FDI not being consistent.
Most private players have signed pacts with their foreign partners allowing them to increase their stake when regulations permit. All the CEOs agreed that this would be dependent on the price.
Sharma questioned the economic sense of foreign promoters hiking their stakes now when they would need to bring it down in a few years, in order to match that of the Indian promoter at the time of divestment.
"If Indian promoters are to divest in favour of foreign promoters, it has to happen at a fair price. This today cannot be determined because there is no clarity on issues such as taxation and life insurance companies' role in the pension arena. Else, the Indian promoter might end up selling his company cheap," said Sharma.
Indian promoters are confident that even if there is no hike in FDI, global players "cannot afford to ignore India," according to Satwalekar.
While there seems to be reluctance to divest in favour of foreign promoters, Indian players feel they would be able to hit the capital market in four to five years.
"We can hit the market once we have written off accumulated losses," said Shivaji Dam, director, Kotak Mahindra Old Mutual Life. HDFC Standard Life is also keen to go public once it breaks even.
While most players do not see any urgency in hiking FDI, Dhananjay Date, CEO Swiss Re India, pointed out "one could see blood on the carpet soon if FDI hike does not come through."
This, he said, would be in the case of smaller players and suggested that reinsurers could help bail out the less-capitalised companies by providing contingency capital. This can take place in the form of quota sharing arrangement if allowed, he added.
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