Mumbai: Insurance Regulatory and Development Authority (IRDA) has turned down the proposal of Indiabulls Financial Services to include the company’s individual promoters as 24.5% shareholders in its proposed insurance joint venture.
In April this year, Indiabulls Financial Services Ltd said that it had entered into a joint venture agreement with Sogecap, the life insurance subsidiary of Societe Generale of France, for its upcoming life insurance venture. Indiabulls together with its promoters/ associates will hold 74% while Sogecap will hold the remaining 26% in the JV.
On Thursday, the company informed the stock exchange that in view of the reservations of IRDA for the proposed subscription of 24.5% of the paid up share capital of Indiabulls Life Insurance by promoters/directors of the company, Indiabulls Securities Ltd (ISL) would pick up the shares. It is likely that the regulator has expressed reservations over having individual promoters in a life insurance company given the huge capital requirement and the long break even time.
Most insurance companies are yet to make profits even after being in the business for seven years. Morever, more than half a dozen companies have invested over Rs 1,000cr in the life insurance business. One of the issues that the IRDA looks at before granting licence is the ability for the promoters to bring in capital to meet future growth. The individual promoters of Indiabulls Financial services include Sameer Gehlaut, Rajiv Rattan, and Saurabh Mittal. LN Mittal of Arcelor Mittal is an investor in the company. The new share capital structure of ILICL would be; IBFSL 49.5%, ISL 24.5% and Sogecap, France - 26%. IBFSL had bring in a third partner as being a NBFC, RBI, has capped the companys total investment in an insurance subsidiary at upto 49.5% of the share capital of ILICL.
