Reliance Capital has foreign ownership up to 26 percent in its life-insurance business (Japan's Nippon picked up the stake at Rs 11,500 crore in 2012) while its general insurance arm does not have any foreign ownership.
Other than Reliance Capital, no other player may be in an immediate need for capital.
Santosh Singh
Analyst
Espirito Santo
The Cabinet today approved an amendment to the Insurance Bill, which increased the composite cap of foreign investment in the insurance sector to 49 percent from 26 percent.
The move was announced by Finance Minister Arun Jaitley in the Union Budget on July 10.
As per the legislation, total foreign ownership, including through the direct and portfolio route, will be capped at 49 percent, which means control in an insurance company would wrest in the hands of a local promoter.
Also read: Max India, Rel Cap soar on cabinet nod for FDI in insurance
"It's a good move and should help cash-starved companies raise capital," SBI Life MD and CEO Atanu Dey said. "Many foreign joint venture partners should be looking to increase their stake."
SBI Life is a 74:26 JV between State Bank of India and BNP Paribas.
The increase in foreign ownership cap could also further boost the prospects of listing of non-listed insurance companies such as SBI Life. However, Dey said no such decision had been taken on whether the insurer would be listed.
However, not many companies may make a beeline for raising funds in the wake of the Cabinet move, Santosh Singh of Espirito Santo told CNBC-TV18.
"Other than Reliance Capital , no other player may be in an immediate need for capital," he said. "But over the long term, we believe Max India could be a beneficiary.
Reliance Capital has foreign ownership up to 26 percent in its life-insurance business (Japan's Nippon picked up the stake at Rs 11,500 crore in 2012) while its general insurance arm does not have any foreign ownership.
The Indian insurance industry consists of 52 companies of which 24 are in life insurance business and 28 are non-life insurers. In FY13, the two segments under-wrote premiums worth up to Rs 2.78 lakh crore and Rs 63,000 crore, respectively.
Rel Capital stock price
On July 24, 2014, at 12:31 hrs Reliance Capital was quoting at Rs 613.10, up Rs 23.05, or 3.91 percent. The 52-week high of the share was Rs 668.40 and the 52-week low was Rs 290.00.
The company's trailing 12-month (TTM) EPS was at Rs 16.62 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 36.89. The latest book value of the company is Rs 467.67 per share. At current value, the price-to-book value of the company is 1.31.
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