Indian promoters in insurance joint ventures are making their foreign partners change the terms in the original agreement. The promoters, who had agreed to allow their foreign allies to increase their stake in the joint ventures from 26% to 49% at a lower price, are now demanding much higher prices in line with the current valuations.
Max India has restructured some of the terms for its partner, New York Life, for raising its stake in joint venture Max New York Life. Modifying the earlier terms of options available to New York Life for purchase of 24% stake in the life insurance joint venture, as and when the regulations permit, New York Life will have to pay the price on a ?fair market value-based formula?, which will include a discount of 10%. This is against the earlier preferential arrangement that was linked to the face value of the share.
The new terms and conditions are valid for the next eight years. ?We had to make changes in the terms and conditions which were prepared a few years ago as the valuation of our life insurance business has changed significantly. Earlier, we thought New York Life would be able to hike its stake in the first few years, but that couldn?t happen; the regulations are not ready yet,?? said Analjit Singh, chairman of Max India. He said, going by the earlier agreement, New York Life would have paid a price that would have been without the premium linked to its current valuation, to hike its stake. Analysts point out that many more partners in insurance joint ventures are planning to rework the original terms and conditions to command better pricing to part with their stakes.