IPO Norms for Life Insurance Companies in India
Going public is probably one of the quickest ways to raise money
. And if it is in cash-intensive business the urgency to hit the market is usually much higher.Insurance companies in India are awaiting the nod from IRDA and SEBI to get listed. The guidelines are awaited and will clearly spell put the norms under which life insurance companies can go public. Currently most life insurance companies in India, barring a few, have started operations with the partnership of global insurance companies whose overall stake if capped at 26%. There have been talks of this being increased to 49%, but nothing concrete has come about it so far.
There would be certain exceptions which would need to be made for life insurance companies as all norms which are usually warranted for listing would not be met in this case. For one, companies need to have a minimum 25% non-promoter holding which would mean one or both the partners in the insurance company will have to decrease their stake to offer to the public. The global insurance companies may not be favourably inclined towards the same as they would not like to see their ownership dwindle in key markets like India where they would like to increase their presence. But as per the current norms they would not be left with too many options.
Valuations of the life insurance companies would be another cause for concern as insurance companies form the backbone of the financial system in any country. It would not be in the interest of the country to see speculative or over optimistic valuations being done for life insurance companies which can come back to haunt the economy and the businesses it insures in case of some scenarios which we have witnessed in the recent past. The guidelines are expected to lay down very clear guidelines for valuations of these life insurance companies.
Life insurance companies like Reliance Life Insurance and HDFC Standard Life are keen to go the IPO way to raise money for their business. Life insurance is a profitable business but it needs a lot of initial capital which will be hard to come by unless the cap on foreign holdings is revised.
IPO Norms for Life Insurance Companies in India
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