Equity Limits Complicate Joint Ventures in India.

Foreign companies setting up insurance ventures in India are worried about how the regulator, the Insurance Regulatory and Development Authority and the country's finance ministry will calculate foreign equity.

The law prescribes a foreign-equity cap of 26% in new insurers. This means that any foreign equity in the Indian partner investing the remaining 74% in the new company also will be taken into account.

This could be a serious entry barrier for some of the foreign companies, such as Britain's Standard Life Assurance Co. and Prudential Corp. plc, which have tied up with Indian companies that already have substantial foreign equity. There are a number of other Indian companies with a significant level of foreign investments that have signed partnership agreements with foreign insurers. The Indian companies and their partners include Dabur and All-state, Aditya Birla Group and Sun Life of Canada, Bombay Dyeing and CGU, Godrej and Rothschild, and Tata Group and American International Group.