Ordinance boosts industry sentiment, but investors may wait and watch

KR Srivats Updated - January 24, 2018 at 03:08 PM.

No immediate equity transaction, capital infusion likely

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The Narendra Modi-led Government’s move to take the ordinance route to usher in insurance sector reforms, especially hike the foreign investment limit, has clearly brought “elation and excitement” in the industry.

However, the consensus among industry players and experts is that an ordinance may not immediately result in a flurry of activity in terms of equity transactions or capital infusion.

Barring a few foreign insurance players, who had already expressed keenness in shoring up their India play, most foreign players (strategic investors) said they will “wait and watch to see the law of the land”.

An ordinance may not be good enough for most of them (those foreign players who are already invested up to 26 per cent) to immediately take the plunge to hike it to 49 per cent, Khushroo Panthaky, Partner, Walker Chandiok & Co, told

Business Line . “Ordinance is a quasi-law. I don’t see too many deals happening now on its strength. Some transaction will happen. New ones will certainly not take the plunge right now and will wait for the actual law when enacted,” he said.

Akshay Chudasama, Partner, J Sagar Associates, a law firm, said an ordinance reinforces the commitment of the Government to get the Bill passed. However, it is certainly not the same as the Bill getting passed, he said, adding that the possibility of an Ordinance lapsing cannot be ruled out. There is uncertainty in the manner of unwinding transactions if that happens, he said, adding that “Consequently, some foreign investors may adopt a wait and watch policy.”

Anurag Sunder, Managing Consultant, PwC India, said getting the Bill through an ordinance is a commitment and intent of getting economic reforms through. “This will boost industry sentiment and confidence. Expected outcomes , for example, new player entry or capital infusion may not play out immediately, as players might prefer to see the Bill in the avatar of the law,” he said.

The proposed hike in FDI in insurance is expected to result in inflow of $8 billion into India. There are about 50 insurance companies in the Indian market, which was opened to the private sector in 2000.

Published on December 24, 2014 17:07