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Standard Life plans bigger India exposure via HDFC

BS Banking Bureau

Standard Life plans to increase its exposure in India, mainly through HDFC group companies, said Iain Lumsden, Standard Life Group finance director, on Tuesday. Lumsden will takeover as the managing director of the group in next March after the present incumbent, Scott Bell, retires.

Standard Life's plans for the Indian joint venture is to provide a vehicle for long-term pension provision as well as life protection, said the MD designate. Even as regulations in India do not permit it as yet, Lumsden anticipates that individuals direct investment towards the equity market gradually as they move towards pension products.

Standard Life has invested over Rs 14 billion in India, much of which has been invested in HDFC and its group companies. It has a 9.9 per cent holding in HDFC (investing Rs 7.50 billion); 4.2 per cent holding in HDFC Bank (Rs 3 billion); 26 per cent stake in HDFC AMC (Rs 560 million); and 17.4 per cent stake in the life insurance venture (Rs 380 million). In addition, Standard Life has funds in the country under FII investment to the tune of $ 30 million.

"We have started with endowment and term products. At a later stage we will introduce a range of pension products in India," said Lumsden. This will follow in line with the expansion of the distribution and agency force, he added.

Contrary to endowment policies, Standard Life offers unit-linked products where the premium payment can increase and vary as per the paying power. Lumsden though said such products need not be invested solely in equity, he stressed on how equity investments have always tended to out-perform the bonds market over a period of time.

He admitted however, that the Indian equity markets have been more volatile and less strong than those in North America and the UK.

HDFC Standard Life's managing director, Deepak Satwalekar, said that start-up companies like theirs were not likely to get into the equity market on Tuesday.

Lumsden added that there is a significant demand for guaranteed products and this required investment in the bonds market. "However, this is not in the interest of the investor, and may not offer competitive returns over a period of time," he said.

"We are moving towards unit-linked, multiple fund and open architecture products. In the case of the latter, we offer funds of other fund managers as well, so that the customer does not feel the need to change fund managers," said Lumsden.

Commenting on the range of products introduced by the new players, Lumsden said: "Suppliers from different parts of the world are coming to India with products from there, it is difficult to compare the merits of the products. It is a complicated market, and could give rise to unhealthy competition". The immediate need is to educate people. Products that offer less value will automatically be ironed out, he added.

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