Comments
The number of incremental deals in the insurance sector after the government raised the foreign direct investment cap to 49 per cent is likely to be limited due to conflicts on valuations, according to Sanket Kawatkar, principal and consulting actuary of Milliman.
“The difference in expectation of the domestic partner on the valuation of the insurance joint venture and what the foreign promoter is ready to pay, is getting reflected in the delay in stake sales,” Kawatkar said.
He said that only around 3 more incremental stake sales are likely to take place during the current fiscal year as many foreign promoters are using a ‘wait and watch’ method before raising stake in their insurance joint ventures.
“The valuation of the insurance joint venture are going to be derived by not just quantifiable aspects but softer aspects such as the growth that the foreign promoter perceives in the Indian market and comfort with the Indian promoter,” Kawatkar added.
Recently, Nippon Life bought 23 per cent stake in Reliance Life Insurance (part of Reliance Capital) pushing up its holding in the company to 49 per cent with an implied embedded value of over three times.
The deal comes close on the heels of Max India’s sale of 23 per cent in Max Bupa — its health insurance business — to its foreign JV partner Bupa Plc. Kawatkar said that these deals will act as a benchmark for other insurance joint ventures to arrive at valuations and evaluate stake sales.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.