New Delhi: The Insurance Regulatory and Development Authority (IRDA) is not in favour of allowing initial public offers (IPOs) by life insurers who have been in business for less than ten years, a condition holding up the IPO guidelines for the sector, reports PTI.
Companies who have been operational for less than ten years, but want to come out with IPOs, have been lobbying hard against this rider, but have not succeeded in their efforts so far. Industry sources said that this is among the key issues delaying the IPO guidelines.
"Insurers can come out with IPO only after completion of 10 years of operations," a senior official with Insurance Regulatory and Development Authority (IRDA) told PTI.
As per the Insurance Act, promoters having a 26% stake can offload equity after 10 years of operation.
However, the legislation empowers the government to reduce the mandatory waiting period before tapping the capital market.
Many companies want the norm to be relaxed so that this capital intensive sector can tap primary market to meet fund requirements. However, their plans have been on hold in absence of the IPO guidelines for life insurers.
Several private sector insurers, including Reliance Life and HDFC Standard Life, have already shown interest in tapping the capital market to augment their resource base.
Though HDFC Standard Life has completed 10 years of operations, Reliance Life does not meet this criteria.
Recently, IRDA chairman J Hari Narayan said that guidelines for life insurance companies to tap the capital market for funds were awaiting the Securities and Exchange Board of India (SEBI) nod and would be out soon.
"IPO guidelines for insurance companies will be out soon.
It has been approved by the Joint Committee of SEBI and has to be approved by the SEBI (board)," Mr Hari Narayan had said.
Last month, the regulator had said that the proposed IPO guidelines for non-life insurance firms were also in the process of finalisation.
The guideline for IPOs of life insurance companies are said to have been approved by SCADA, a body constituted by SEBI, and is awaiting final nod from the market regulator.
Currently, most of the 22 private life insurers and 17 non-life players have foreign partners. The Insurance Act caps foreign direct investment at 26%.
According to sources, another reason behind the delay in the IPO norms is profit track-record of insurance companies.
The present IPO guidelines of SEBI requires a three years track-record of profit for a company to float a public issue.
However, most of the insurance companies are yet to reach the break-even point and thus are not eligible for coming out with an IPO under the present norms.
Ashok Leyland margins surprise positively; lower realisation and higher costs severely dent Ambuja’s profitability; ACC margins are at historical lows; TCS delivers best volume growth in 21 quarters; Canara Bank asset quality steady; Hindustan Zinc’s realisations better than expected
ASHOK LEYLAND Q2
Net sales: Rs27.14 billion (expected range Rs24.89 billion-Rs28.35 billion)
Net profit: Rs1.67 billion (expected range Rs1.34 billion-Rs2.09 billion)
CANARA BANK Q2
NII: Rs20.03 billion (expected range Rs17.06 billion-Rs18.2 billion)
Net profit: Rs10.08 billion (expected range Rs6.38 billion-Rs10.36 billion)
HINDUSTAN ZINC Q2
Net sales: Rs22.01 billion (expected range Rs19.93 billion-Rs22.34 billion)
Net profit: Rs9.5 billion (expected range Rs8.64 billion-Rs10.24 billion)
Net sales: Rs16.37 billion (expected range Rs16.60 billion-Rs18.32 billion)
Net profit: Rs1 billion (expected range Rs1.72 billion-Rs2.64 billion)
AMBUJA CEMENTS Q3
Net sales: Rs15.64 billion (expected rangeRs15.50 billion-Rs16.27 billion)
Net profit: Rs1.52 billion (expected rangeRs1.60 billion-Rs2.77 billion)
Net sales: Rs92.86 billion (expected range Rs87.44 billion-Rs89.04 billion)
Net sales: $2 billion (expected range $1.88 billion-$1.93 billion)
Net profit: Rs21.07 billion (expected range Rs19.52 billion-Rs25.90 billion)
(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife).
Tokyo: Observing that infrastructure deficit was posing a major constraint to India's growth, prime minister Manmohan Singh today said an outlay of over $1 trillion was envisaged for infrastructure projects during the next Five Year Plan beginning 2012 and invited Japanese firms to play a greater role in this endeavour, reports PTI.
Mr Singh said his government was determined to continue the economic reforms to create a favourable investment environment and facilitate higher capital inflows and push the reform of both direct and indirect taxes with the aim of unifying indirect taxes into a single Goods and Services Tax (GST) in due course.
Addressing a business luncheon attended by top business leaders from India and Japan, he noted that India's growth, which fell to 6.5% in 2008-09 because of the global economic recession, recovered to 7.4% in 2009-10 and is projected to be 8.5% in 2010-11.
He hoped that India will return to 9% growth in 2011-12.
"I am confident that strong fundamentals of the Indian economy will enable us to achieve our objective of double-digit growth in the coming decades," Mr Singh said.
Underlining that he was not underestimating "many challenges" that are faced in achieving such high level of growth, he said "We need to close the infrastructure deficit, especially in the power, transport and communication sectors.
"This is a major constraint on our development and we will give high priority to infrastructure development in the years ahead."
Mr Singh said that India's investment needs will be at least $1 trillion, part of which will come from within but "we expect Japanese companies to also provide their support."
He said during India's next Five Year Plan from 2012 to 2017 "we envisage financial outlays of over one trillion US dollars on infrastructure projects."
Private investment will play a large role in achieving this target, Mr Singh said, while asking Japanese companies to play a much greater role in development of India's economy.
From India, Mukesh Ambani, Reliance Industries (RIL) chairman and managing director; Sunil Bharti Mittal, Bharti CMD; Fortis chairman Malvinder Singh and HDFC chairman Deepak Parekh were among those present at the luncheon.