Business Daily from THE HINDU group of publications
Wednesday, Jan 02, 2008
ePaper | Mobile/PDA Version
Business Daily from THE HINDU group of publications Wednesday, Jan 02, 2008 ePaper | Mobile/PDA Version |
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Life Insurance Markets - Stocks
BL Research Bureau Stake sales by financial services companies in their insurance arms have helped drive a re-rating of the former on the bourses in recent times. But the sale of a 7.15 per cent stake in HDFC Standard Life Insurance Company by HDFC to its foreign partner, may not have any immediate positive implications for HDFC’s stock price. For one, such a move has been expected ever since Standard Life sold off its stake in HDFC in May 2006, thus reducing its indirect holdings in the insurance joint venture. With Standard Life now acquiring a direct stake in the insurance company, its total stake in this venture would go up to the stipulated FDI (foreign direct investment) limit of 26 per cent that is in force for insurance companies. This rules out any further hike in stake by Standard Life in the insurance venture until these FDI limits are revisited by the regulators. Second, the stake sale also happened at a price pre-agreed between the parties and not at market-based valuations. Thus, the deal may not have any signalling effect for the valuation of the HDFC stock at this juncture. TriggersHowever, for investors in the HDFC stock, there remain two triggers that could lead to further unlocking of value on its insurance business — the planned IPO of HDFC Standard Life which is slated before 2009 and any relaxation in the current regulatory limits for foreign holdings in Indian insurance companies. The latter could prompt Standard Life to acquire a further stake in the insurance business at more market related prices. HDFC to sell 7.15% in life venture to foreign partner HDFC Standard Life looks for break-even by mid-2007 Standard Life stake sale to Citi okayed More Stories on : Life Insurance | Stocks | Housing Development Finance Corporation Ltd
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