The Hindu Business Line : `We want predictability, we have patience to wait'

Wearing as he does, the hats of the Senior representative and Country Head & CEO of American International Group (AIG) Inc India, since April 2000 and that of the President of the Indo-American Chamber of Commerce, Mr Mehta is adept in the art of providing the careful response. As Country Head & CEO, Mr Mehta has the responsibility for all AIG's interests in India covering insurance, financial services and investments.

AIG entered the private insurance sector, both in life and general insurance, jointly with the Tata Group.

Prior to joining AIG, Mr Sunil worked with Citibank for over 17 years where he held various senior positions. His last assignment was the Head of Corporate Bank in India and Senior Credit Officer. He is the immediate past Chairman of AMCHAM (American Chamber of Commerce in India) and served on the National Executive Board for over eight years.

Mr Mehta is engaged in several community development projects. He is Vice-Chairman of United Way of Mumbai and on the endowment board of Spastic Society of North India. By way of explaining these interests, he whips out his visiting card and turns it on its back to reveal a white and empty side.

He says, "We are all defined by what we are doing in a particular company or the position that we hold. Once we leave it, we don't have an identity. We need to develop an interest in something that goes beyond these pursuits. We need to fill up this side."

Mr Sunil graduated from University of Delhi with Honours in Bachelor of Commerce. He is a Chartered Accountant and an alumni of The Wharton School of Management, University of Pennsylvania.

He is extremely bullish about India, even after the change in Government. Excerpts from the interview.

The cap on foreign direct investment in insurance sector is currently at 26 per cent. After the change of Government, one gets the impression that it will not be lifted or reviewed for sometime. What is your perception?

I have not seen any indication to this effect. On the contrary, the statements made by the Finance Minister, indicate that he wants to be seen as investments minister. He is going to be looking for more investments into the country and as part of that process, I expect that the Government will revisit industries/ sectors which will provide more FDI or catalyse more investment in the sector.

Clearly the insurance sector has done well since liberalisation. It has created significant incremental employment; it has expanded the market; there have been new products; customer experience has improved. The Government is settling down and will take a look at it in due course.

How much has employment in the sector gone up?

There are no clear statistics. But if you look at the direct and indirect employment, the agents, outsourcing of work, the third party administrators, apart from employees, there should have been an incremental employment of 4-5 lakh people from 1999-2000 onwards. The development has been broadbased - you have women, youth and people from different regions that have participated in this process.

What does AIG want its stake level to be?

There is an N.K. Singh report, which has suggested taking the foreign stake up to 49 per cent. I wouldn't like to say what the stake should be. It is for the Government to decide what is appropriate. My view is that they should just open the sector. It is up to foreign and domestic investors to decide what should be the share between them.

Will AIG be bringing in extra capital?

We will bring in whatever is necessary.

What is the capital base of the Tata-AIG ventures?

It is about Rs 250 crore in the life company and about Rs 140 crore in the non-life venture.

Is that sufficient for the next 2-3 years?

That is dependent on the business itself. As the business grows, we'll bring in more capital.

What about pension funds? Are you in the race to enter this sector?

I think it is wrong to suggest that there is any race on. Race for what?

There is an indication that only a few players will be allowed into the sector?

That is only speculation - media speculation! I won't say there is anything else. To the best of my knowledge, there is an interim pension regulator, appointed by the Government, who should look into this. Nothing has been stated about the criteria for entry. Only then we can say whether we are going to enter.

We think there is a tremendous amount of potential - not merely from an investor's perspective. It is good for the country, because insurance and pension is fundamentally long term capital raising. These have to be invested in long-term assets that range between 7 and 25 years. This touches only 10-11 per cent of the population. The balance is completely untouched. That is where it will make a big difference.

Your investments in India were said to be around $450 million across various industries (telecom, infrastructure, manufacturing and retailing). What is the current figure? How much more will you bring in?

There have been some disinvestments. The current figure is around $350 million. It is still a pretty large figure. We don't work based on a particular number. It is based on opportunities. We don't want to put an artificial cap. There is an ongoing assessment. We can't lock up capital, say a billion dollars and keep it aside. It doesn't work like that. Tomorrow, if there is an opportunity, we'll raise the necessary funds.

Why did you disinvest? Is it because you have achieved your targeted return?

It is not a question of return. We have invested for a particular period. These are funds with a time horizon.

Do you look at India independently or as part of an Asian grouping where you allocate 5-10 per cent for this country?

Capital flows wherever you get maximum return. India has carved a niche for itself among emerging markets. There are very high expectations of business opportunities in India. Of course, some budgetary allocations are done for internal purposes.

What are your expectations from the Budget?

We are hoping that the Finance Minister looks towards promoting more investments in infrastructure, agriculture and manufacturing. Of course, we have to keep in mind that political parties have obligations to their constituencies. The good part of all this is that in this coalition government, different regional parties are getting to be part of governance. We are going through an evolution, where it is not just the responsibility of one party alone to do what has to be done for the country. Fundamentally, there needs to be continuity and movement in the same direction.

As a businessman and as a representative of a foreign investor, wouldn't you rather move investments to another country rather than wait for this Government to slowly evolve, find its feet and see reason? Foreign investors don't wait for local Governments to mature, do they? Are you prepared to wait?

I am saying that if directions and indications in this Budget are towards the reform process and liberalisation, long terms investors have the patience and they will come in. We want predictability. It's all about that.