Warren Buffet to enter the Indian insurance market
Mumbai: Warren Buffet, the Chief Executive of the Berkshire Hathway would visit India next year for the acquisition of majority stake in a state owned general insurance company. Sources planning his visit next March told that, he would discuss the issue with the Union Government, reports Shilpy Sinha of Business Standard. The rules do not allow the government to shed stake in the four public sector general insurance companies- New India Assurance, United India Insurance, National Insurance and Oriental Insurance.
Berkshire works on the business lines of Insurance and reinsurance. Buffet had told earlier about India being one of the possible investment destination for Berkshire investments.
Orissa-born Ajit Jain, who runs the reinsurance business, might get the succession of Berkshire Hathway. Overseas investors are currently operating through liasion offices in India reinsurance as none of the market players have set up an Indian reinsurance venture.
The rules bar foreign investors from holding more than 26 percent stake in an insurance company. The sources added that Buffet's fallback option had been to set up a general insurance company in India or acquire a significant stake in an existing company.
Even if the government has proposed to increase the ceiling to 49 percent, Buffett cannot have a majority control, though he can be the largest shareholder, with the remaining stake split between Indian players.
The government is intending for a merger instead of selling stake to private players. Besides the four companies making profits, thanks largely to the investment income, there is no immediate need to raise equity. Also, "with offices spread across the country, there is no need for major expansion," said an executive at a public sector company.
New India Assurance being headquartered in Mumbai is the largest player and has had a strong focus on corporate lines, mainly due to the fact that it is headquartered in Mumbai, the country's business and financial hub.
