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Standard Life Considers Raising Indian Stake After Rule Change

Standard Life Plc, Scotland’s biggest insurer, may almost double its stake in its joint venture in India after the government proposed to raise caps on foreign investment.

The firm may increase its holding in HDFC Life Ltd. to 49 percent from 26 percent if government proposals to lift restrictions on foreign investment are agreed by lawmakers, Nathan Parnaby, chief executive officer of Standard Life International, said in an interview today.

“We would be interested in increasing our stake,” Parnaby said. “It depends on the details of the rules, it depends on the price and it depends on our perception of the economy at the time.”

Indian Prime Minister Manmohan Singh yesterday unveiled policy changes to increase foreign investment and bolster a slumping economy. The proposals, to allow overseas firms to increase ownership of insurance companies to as much as 49 percent from 26 percent and to permit foreign investment in pension funds, would be the biggest opening of the economy to global investors since 2004.

“There’s no question this is a big step for life insurance in India if goes through,” Parnaby said. “There are a lot of technical changes that are very encouraging on top of the foreign direct investment change.”

Standard Life only gets about 2.6 percent of operating profit from India because it’s more focused on investing in the business for future growth, it said in its half-year report. Revenue from the division rose 25 percent to 233 million pounds ($377 million) in the first half of 2012, it said.

Increasing the stake in HDFC Life at a fair price would be received positively by shareholders because “the high savings rate and low penetration of insurance products in India means the potential is huge,” according to Gordon Aitken, a London-based analyst at Royal Bank of Canada with a hold rating on the stock.

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