A New Lifeline For Life Insurers

In a move that could give indemnity to India's ailing life insurers, the Insurance Regulatory and Development Authority (Irda) has removed the mandatory three-year profitability clause for life insurers to float initial public offerings (IPOs). This could benefit insurers such as ICICI Prudential, HDFC Life and Max New York Life, who have been operating for 10 years but do not have a three-year profitability period. Lack of big inflows from FDI and public funds has been dogging the sector, which claims the business is unique and needs exception from the profitability clause. Sources say Irda will soon make it mandatory for insurers wanting to raise money from the market to have an embedded value twice their paid-up capital.

Inflation Matters
Food inflation has hit a seven-week low of 7.61 per cent for the week ended 25 June, thanks to a fall in prices of pulses and vegetables. Food inflation, measured by the wholesale price index, stood at 7.78 per cent during the previous week. But the relief will not last long. Finance minister Pranab Mukherjee says inflationary pressure is likely to continue and overall inflation in June could move up, from 9.06 per cent in May. Fuel and power index rose due to the hike in prices of diesel, cooking gas and kerosene, which came into effect last month.

Bitter Doses
Looks like it is bad times for Indian pharma companies; for three of them at least. US drug regulator FDA recently banned Dr. Reddy's from selling medicines made at its Mexican facility in the US. The FDA levied an import alert on the products after it found the company had violated certain manufacturing ethics laid down by the regulator. Meanwhile, the FDA sent a warning letter to Ahmedabad-based Cadila Healthcare over violation of current goods manufacturing practice regulations for finished pharmaceuticals. The US is the largest pharma market in the world, and accounts for about a quarter of India's Rs 50,000-crore drug exports. In another instance, Ranbaxy Laboratories has said it is recalling all unexpired stock of Isotretinoin 20-mg capsules, used in the treatment of severe skin conditions, from the UK following a directive from the European Commission.

Splitsville?

NEW VENTURES: Facebook and Skype take on Google+; Cairn India faces another oil ministry blockage

Consumer products giant Godrej denied media reports saying that it has decided to end the India joint venture with US-based Hershey. The decision, said reports, followed management differences in running the entity. Hershey was reported to be selling its stake in the venture to Godrej for an undisclosed sum. The US-based chocolate and confectionery maker owns 51 per cent in Godrej Hershey, while Godrej Industries owns 43.4 per cent.

Facebook Calling
In a seemingly direct charge at Google+, Facebook this week launched a video calling facility in partnership with Skype. Now around 750 million Facebook users can make video calls on the social networking site. The feature does not support group chat now, something which Google+'s Hangouts application offers. But who's smiling the most? Microsoft, which bought Skype in a $8.5-billion deal (regulatory approval is pending). It is invested in Facebook as well — 1.6 per cent stake bought for $240 million in 2007.

Oil Ministry Vs Cairn India
Cairn India's worries are far from over. In another face-off, the oil ministry has blocked the company's plans to start crude oil production from the Bhagyam oilfield in the Rajasthan bloc. Cairn had plans to put the Bhagyam oilfield, the second biggest find in the bloc, into production by October to take total output from the Rajasthan block to 175,000 barrels per day. Reports say the ministry has asked Cairn to calculate profit from the block after treating royalty as a cost recoverable item. But Cairn says the issue of profits entitlement should not be linked to production from the field.

(This story was published in Businessworld Issue Dated 18-07-2011)