Indian promoters of insurance companies can scale down their equity holding up to level of 26 percent at any time after registration under the Insurance Act.
This has been provided in a clarificatory circular issued by the Finance Ministry on Wednesday, official sources said. It also provides that Indian promoters would be mandatorily required to reduce their equity holding to a level of 26 per cent after 10 years if not done already in a phased manner for which rules are being issued separately.
This clarificatory circular has been welcomed by private life insurers. It is expected to pave the way for a regulatory nod for the recent deal of Japan-based Nippon Life agreeing to acquire 26 percent stake in Reliance Life Insurance. While the overall deal size was put at Rs 3,000 crore, Reliance Capital, which is off-loading a part of its stake in Reliance Life, is likely to get Rs 2,700 crore from this transaction.
“We welcome the circular. This clarification will help us obtain necessary regulatory approval. The IRDA also has to give us a letter approving the transaction,” Mr Sam Ghosh, Chief Executive Officer of Reliance Capital, told
The Finance Ministry circular also specifies that foreign direct investment (FDI) cap in insurance companies would remain at 26 per cent.
There has been several transactions this year involving stake sale by Indian promoters. Recently Punjab National Bank had announced that it was acquiring a 30 percent stake in MetLife India. This circular is expected to help in obtaining regulatory approvals for such deals, sources said.