'SocGen fraud not to affect insurance JV with Indiabulls'
The insurance regulator will sound out its French counterpart before clearing a proposed life insurance joint venture between Indiabulls Financial Services and Societe Generale’s (SocGen) insurance arm.
By TNN |
HYDERABAD/MUMBAI: The insurance regulator will sound out its French counterpart before clearing a proposed life insurance joint venture between Indiabulls Financial Services and Societe Generale’s (SocGen) insurance arm.
A multi-billion euro fraud being uncovered at SocGen has cast a shadow over the proposal, but Gagan Banga, CEO, IBFSL, said the two partners were going ahead with the venture.
“Our partnership is with Sogecap, an insurance subsidiary of SocGen, which does not depend on the parent for capital. I have received confirmation from Sogecap’s chief executive that they are going ahead with the partnership,” Mr Banga added. SocGen said it was raising euro 5.5bn in capital, with preferential subscription rights, which has been fully underwritten by a bank syndicate.
IBFSL and Sogecap have formed joint venture to foray into the domestic life insurance market. Sogecap will hold a 26% stake in the venture, with IBFSL holding the balance 74%. Sogecap runs life insurance business in over 10 countries and is the third-largest insurance company in France. It was smooth sailing for the JV until the $7.14 billion fraud uncovered at the French Bank raised doubts about its financial health.
Earlier, joint ventures in India got delayed on account of the time taken by the foreign regulator in clearing investments in India.
The need for clearance from an overseas regulator came to the fore in the case of Sompo, whose proposal for a venture in India was not cleared by the Japanese regulator immediately. The Insurance Regulatory and Development Authority (IRDA) had also sought clearance from the German regulator for the HDFC Ergo insurance venture.
In the case of SocGen, IRDA will approach the French regulator for a feedback on the track record of Sogecap. “While clearing licences for joint ventures with foreign partners, we normally get feedback from their regulator on the company’s track record. We will do the same with the French regulatory authority,” said CS Rao, chairman, IRDA.
SocGen earlier said it has unearthed a $ 7.14 billion fraud by a single futures trader, who orchestrated a series of bogus transactions. The fraud destabilised the bank, which was also hit by the subprime crisis. The bank said it must seek 5.5 billion euros ($8.02 billion) in new capital.
As for the IBFSL-Sogecap joint venture, senior IBFSL officials had earlier said that the life insurance venture will have an initial capital of Rs 300 crore, of which SocGen has contributed Rs 150 crore for its 26% stake.
Indiabulls has already got permission from the Reserve Bank of India (RBI) for investing in the JV. It is now seeking approval from IRDA. SocGen has a strong India presence through a JV with SBI. In SBI Mutual Fund it owns 35%. SocGen has also bought out Apeejay Finance, a Kolkata-based NBFC, and is looking at retail financing opportunity in India.
A multi-billion euro fraud being uncovered at SocGen has cast a shadow over the proposal, but Gagan Banga, CEO, IBFSL, said the two partners were going ahead with the venture.
“Our partnership is with Sogecap, an insurance subsidiary of SocGen, which does not depend on the parent for capital. I have received confirmation from Sogecap’s chief executive that they are going ahead with the partnership,” Mr Banga added. SocGen said it was raising euro 5.5bn in capital, with preferential subscription rights, which has been fully underwritten by a bank syndicate.
IBFSL and Sogecap have formed joint venture to foray into the domestic life insurance market. Sogecap will hold a 26% stake in the venture, with IBFSL holding the balance 74%. Sogecap runs life insurance business in over 10 countries and is the third-largest insurance company in France. It was smooth sailing for the JV until the $7.14 billion fraud uncovered at the French Bank raised doubts about its financial health.
Earlier, joint ventures in India got delayed on account of the time taken by the foreign regulator in clearing investments in India.
The need for clearance from an overseas regulator came to the fore in the case of Sompo, whose proposal for a venture in India was not cleared by the Japanese regulator immediately. The Insurance Regulatory and Development Authority (IRDA) had also sought clearance from the German regulator for the HDFC Ergo insurance venture.
In the case of SocGen, IRDA will approach the French regulator for a feedback on the track record of Sogecap. “While clearing licences for joint ventures with foreign partners, we normally get feedback from their regulator on the company’s track record. We will do the same with the French regulatory authority,” said CS Rao, chairman, IRDA.
SocGen earlier said it has unearthed a $ 7.14 billion fraud by a single futures trader, who orchestrated a series of bogus transactions. The fraud destabilised the bank, which was also hit by the subprime crisis. The bank said it must seek 5.5 billion euros ($8.02 billion) in new capital.
As for the IBFSL-Sogecap joint venture, senior IBFSL officials had earlier said that the life insurance venture will have an initial capital of Rs 300 crore, of which SocGen has contributed Rs 150 crore for its 26% stake.
Indiabulls has already got permission from the Reserve Bank of India (RBI) for investing in the JV. It is now seeking approval from IRDA. SocGen has a strong India presence through a JV with SBI. In SBI Mutual Fund it owns 35%. SocGen has also bought out Apeejay Finance, a Kolkata-based NBFC, and is looking at retail financing opportunity in India.
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