Govt relaxes norms for FII investments in infra sector

Under the revised norms, FIIs would be allowed to invest up to $5 billion out of the total limit of $25 billion in long-term infrastructure bonds, with an initial maturity of five years and lock-in period of one year

New Delhi: Concerned over low inflow of foreign institutional investor (FII) funds into long-term corporate bonds, the government on Monday announced relaxation in the norms that would allow foreign investors to invest in infrastructure bonds and trade such instruments among themselves, reports PTI.

Under the revised norms, which would be notified by the market regulator Securities and Exchange Board of India (SEBI), FIIs would be allowed to invest up to $5 billion out of the total limit of $25 billion in long-term infrastructure bonds, with an initial maturity of five years and lock-in period of one year.

The relaxation in guidelines follows low inflows of FII funds in corporate bonds. While the government on 31 March 2011 had raised the investment limit in such bonds from $5 billion to $25 billion (Rs1.12 lakh crore), only $109 million (Rs500 crore) has been received so far.

“...consultations were held with the stakeholders on the issue and it was concluded that the three-year lock in period and doubts regarding the residual maturity of five years were discouraging FIIs from investing in this scheme,” a release said.

The government, it said, has modified the scheme in consultation with the Reserve Bank of India (RBI) and SEBI to “make it more attractive to FIIs”.

SEBI last month had allowed Qualified Foreign Investors (QFIs) to invest up to $3 billion, out of the limit of $25 billion, in Mutual Fund Debt Schemes which invest in the infrastructure sector.

Out of the remaining $22 billion, $5 billion could be invested by FIIs in long-term infrastructure bonds “with an initial maturity of five-years or more at the time of issue and residual maturity of one year at the time of first purchase by FIIs”.

These investments, it said, will be subject to lock-in period of one year. The FIIs would also be allowed to trade such securities among themselves within that period and sell to domestic investors after expiry of one year.

It further said that the remaining $17 billion limit would be available to FIIs and can be invested in long-term infrastructure bonds with an initial maturity of five years or more and residual maturity of three years at the time of first purchase by FII.

The lock-in period for such investments would be three years. However, FIIs would be allowed to trade such instruments among themselves during the three-year period and after that they would be allowed to sell them to domestic investors.

The government proposes to double investment in infrastructure sector to $1 trillion during the 12th Plan (2012-17).


Bajaj Allianz General Insurance: Right risks should get right price for mediclaim, motor insurance

Bajaj Allianz General Insurance is collecting detailed customer information which together with the claims experience will help it to arrive at the right price for health and motor insurance

TA Ramalingam, head-underwriting, Bajaj Allianz General Insurance, says motor insurance has better data availability than health insurance so far. In an interview to Moneylife, he was optimistic that health insurance, like motor insurance, will be able to offer the right price for good policyholders. Excerpts:

You mentioned about in-house data for analysis. Do you use the data from the Insurance Information Bureau (IIB), a body of the Insurance Regulatory and Development Authority (IRDA)?

We depend on management information systems and constant feedback from our in-house claims processing team (health administration team, or HAT). It sends signals based on the claims experience to help us refine the underwriting process. We do look at IIB at the macro level to crosscheck our experience, like on the top five diseases and so on.

IIB data may not be accurate. Your comments.

We may get misled if we entirely rely on it. We may end up on a different track. Some insurers may not give data in the format that is actually wanted by IIB. For example, new insurers may give data in sub ICD level rather than ICD level. (ICD stands for International Classification of Diseases.) We depend on our data analysis and just crosscheck with IIB at the macro level. The more qualitative data we get, the better it is from the business perspective. If the common insurance database is available with accurate information, it will help the industry.

You have rich data from your claims experience. How would you improve on it? New insurers have a lot of questions at the time of proposal.

New companies are capturing detailed information about customer profile and medical conditions. It helps with proper customer segmentation. Beyond a certain level, we can't just fight on price. We will be competitive with proper segmentation. The detailed data capture has to happen to offer right pricing for customers. It will happen soon in health insurance. Agents will see other agents doing it and will follow suit.

Car insurance has started capturing a lot of information at the proposal stage to offer better premium rates for good drivers compared to bad drivers.

Exactly. Motor is doing it to a great extent and health will follow it. After all, motor and health are big portfolios of general insurance. Today, the available information is not good enough. The actuaries cannot do proper pricing due to lack of complete information. Right risks should get the right price.

(The first part of this interview was published on Friday. Read, "Bajaj Allianz General Insurance: Senior citizen mediclaim product has been profitable"


Forster’s exit not to impact JLR turnaround: Tata Motors

Reacting to market speculation that Forster's exit could have an impact on its two brands and their turnaround, a company spokesperson said: "It would be wrong to credit Jaguar Land Rover's turnaround to Carl-Peter Forster"

New Delhi: Tata Motors today said the sudden exit of its Group CEO and managing director Carl-Peter Forster will not impact the future of Jaguar Land Rover (JLR), stating that "it would be wrong to credit" the former executive for turning around the British marquee, reports PTI.

Reacting to market speculation that Forster's exit, at a time when sales of JLR have not been encouraging, could have an impact on its two brands and their turnaround, a company spokesperson said: "It would be wrong to credit Jaguar Land Rover's turnaround to Carl-Peter Forster."

He said the turnaround in JLR commenced 24 months ago, while Mr Forster had joined Tata Motors in February 2010.

After the downturn of 2008-09, JLR made operating profit of Rs325.27 crore in the quarter ended September 2009 that propelled Tata Motors' consolidated net profit to Rs21.78 crore, as against a loss of Rs941.75 crore in the same period a year ago.

According to the spokesperson, the turnaround of JLR was "following the successful efforts made by the management team to cut costs and the successful introduction of the new Jaguar XJ and XF sedans".

"The Jaguar Land Rover business has been following the operating plans put in place after Tatas took over the business," he added.

For the first quarter ended 30 June 2011, Tata Motors group posted a net profit of Rs1,999.62 crore as compared to Rs1,988.73 crore for the quarter ended 30 June 2010.

Reacting to Mr Forster's resignation, whose exit was announced after the market hours last Friday, the Tata Motors' scrip fell 0.41% on the BSE to Rs145.35 per share.

Market watchers had pointed out that his exit has not come at the right time as JLR sales have been not so encouraging this fiscal.

In the April-July period this fiscal, sales of Jaguar Land Rover were 81,209 units, up 6%. During the period, Jaguar sales were down 26% at 15,715 units while that of Land Rover were at 65,494 units, up 18%.

When he joined Tata Motors in February 2010, Mr Forster was given the overall responsibility of Tata Motors operations globally, including Jaguar Land Rover.


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