Barely a month after raising Rs 8,750 crore from the public to fuel its banking business, ICICI Bank is reaching out for capital again-this time around, for its insurance business-from foreign investors. And, the money is good-over a billion dollars at current estimates. It will definitely be better if the cap on foreign investments in the insurance sector is eased from its existing level of 26 per cent. However, the inertia is significant-the Left parties, allies of the ruling coalition, are loath to this easing in regulation. Ironically, their approach has only led to flight of business.
Ironically, the cap on FDI in insurance only exerts greater pressure on the government to attract FDI in infrastructure. This, since the sector requires long-term funds, best served by the insurance sector.
While the government is to blame for not promoting growth in the insurance sector, the large private companies are equally guilty. The lack of courage and conviction on the part of the state to open the FDI gates in the insurance sector is only matched by the lack of aggression on the part of the companies.
This could be a fallout of their diversifications-the various business segments fight for the same investment kitty and M&A opportunities only add to this competition. However, consider: Over the last six years, market leader ICICI Bank has invested Rs 1,850 crore in the life insurance business, and another Rs 220 crore in the non-life business. Its business is now worth close to 12 times the original investments, given that the insurance holding company is valued at around $5 billion (Rs 20,500 crore). Organic growth surely brings its rewards.
