The Insurance Bill raising the foreign composite limit from 26% to 49%, including FDI and FII, has passed both houses of parliament after a seven year wait. We believe the bill, which still requires presidential approval to become law, could lead to new listings of companies and/or increased stakes by foreign partners though we note that control will remain with Indian managements.
At the full potential increase of 23% in foreign holdings, we estimate India stands to see life insurance sector investment of US$6 bn. The market cap of companies that we cover is roughly US$12 bn, or c.27% of life insurance market share and c.60% of the private sector’s share. We believe a sell down could lead to lower valuations for private banks as investors would have a new avenue of investment.
