In spite of an increase in the FDI limit in insurance in the recent Budget, the Allianz Group of Germany, which operates in India through two joint ventures with the Bajaj Group, is unlikely to take any final decision immediately, said Rahul Bajaj, chairman of Bajaj Finserv, the holding company for insurance business.
?Most foreign companies are very concerned about foreign equity and our understanding is that there is no way they can consolidate it in their accounts,? Bajaj said on Wednesday.
Following the increase in the FDI limit in insurance from 26% to 49% in the General Budget, there was considerable interest at the annual general meeting of Bajaj Finserv on Wednesday on whether Bajaj would offload their stakes and if Allianz was going to hike its stake in the two JVs.
The Allianz Group will have to consider changes in regulations in the country since they entered into an agreement with the Bajaj Group in 2001. Allianz holds a 26% stake in the two insurance JVs ? Bajaj Allianz General Insurance Company and Bajaj Allianz Life Insurance Company.
Bajaj explained that the two groups had an agreement that is valid up to 2016 regarding transfer of shares in the two JVs.
He said as per the agreement, the transfer was to happen at an original cost plus fare return which was fixed in the 9-16% annualized return range but subject to RBI regulations. But if such a transfer takes place after 2016, it will happen at the market price, he added.
As per their agreement, there is a call option in their life insurance JV to go up to 74% and to go up to 50% in the general insurance business.
