Bajaj group chairman Rahul Bajaj has indicated his desire to allow the insurance partner Allianz of Germany to hike stake in their joint ventures at a “fair and reasonable price” as per the Reserve Bank guidelines and Insurance Act provisions.
Bajaj insurance firms — Bajaj Allianz Life and Bajaj Allianz General Insurance — are in discussions with the Allianz group on hiking the German giant’s stake in the two joint ventures from 26 per cent to 49 per cent.
“They had written to us about exercising the call option. If they want to increase the stake, we welcome it. It’s incorrect to say that Bajaj is against Allianz raising the stake,” Rahul Bajaj said, scotching speculation that Bajaj is against Allianz hiking stake.
Insurance Regulatory and Development Authority (IRDA) chairman TS Vijayan had recently said at least six insurance companies have expressed interest in raising the stake of their foreign partners from present 26 per cent to 49 per cent. Although the government raised the cap on FDI in insurance sector in March this year, it’s yet to receive any formal proposal from global insurance giants to increase the stake in the Indian joint venture in the last six months.
“We need to follow Indian regulations on valuation and management control. Insurance Act states that management control has to be with the Indian partner. This means Indian partner will have majority on the board,” Bajaj told The Indian Express.
IRDA will come out with guidelines on corporate governance and management control this month. “Maybe there will be more clarity on these issues by that time,” Bajaj said.
“There are only two issues. We are in discussions on the valuation and majority control for the Indian promoter. The hike has to be at a fair and reasonable price as per the RBI guidelines,” he said. The Act clearly says that being a major shareholder, the management control should be with the Indian partner. This has prompted foreign firms to take a cautious stand as the management control and day-to-day affairs of some joint venture insurance firms operating in India are now with the foreign partners.
Bajaj said the group has “excellent relationship” with Allianz and worked together for the last 15 years. There’s no plan to go for an initial public offer (IPO), he said.
Bajaj Allianz Life is on a recovery mode after recording a relatively low performance for last few years. However, Bajaj Allianz General insurance has maintained its steady performance and in fact is the only company to be consistently recording underwriting profit in the industry.