IRDA gives more time for insurance IPOs

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New Delhi, Mar 14: Insurance majors are likely to get a breather with the Insurance Regulatory and Development Authority (IRDA) and the government set to extend the deadline for their listing on the bourses.

With the foreign direct investment (FDI) limit still capped at 26%, the regulator may decide to provide more time to insurers for launching their initial public offers.

At present, all insurance firms are mandated to list within 10 years of operation.

According to official sources, the government and the regulator are free to take a relook at the issue and set fresh deadlines for listing at their own discretion.

Companies wishing to launch IPOs are required to register net profits for at least three straight years before hitting the market.

Sources said that the government is unlikely to take any decision on increasing FDI limit in the insurance sector to 49% from the current 26% in 2008-09, with the Left parties strongly opposing such a move.

There was no mention of the issue even in finance minister P Chidambaram’s budget speech this year. Political analysts said the pending reform measures in crucial sectors like insurance, pension and banking, may gather dust as the UPA government is set to play the ‘common man’ card.

Some industry sources even said that with the FDI constraint, the Indian partners may develop cold feet in infusing more capital into their ventures in the immediate future.

At present, it is estimated that there is only around Rs 2,836 crore FDI in the sector.

According to an analyst, life insurance majors in India require an additional capital infusion of about Rs 10,000 crore in the next two years to go ahead with their expansion plans in the country, while sustaining a growth rate of about 70%.

Industry insiders said there could be a serious crunch of capital in the coming two to three years, if the FDI limit is not raised to 49%.