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Credit growth at 4-month high belies IIP’s gloomy picture:
The index of industrial production (IIP) has posted its worst showing in three years, but that’s sharply contradicted by loan growth data which is at a four-month high. Besides, projects are taking off at the fastest pace in three years — trends that should ease the intense pressure on Reserve Bank of India governor Raghuram Rajan to cut interest rates before the next monetary policy announcement scheduled for February 3.

Rajan faced renewed calls on Friday after IIP unexpectedly contracted 4.2% in October, raising concerns that growth might be faltering amid slowing inflation, reflecting weak consumer sentiment and seeming lack of investment.

Foreign Investment Promotion Board to consider 31 FDI proposals on Friday:
FIPB will also take up nine proposals, which were deferred for a decision in its earlier meetings. The nine proposals include –Pureplay Investment Partners (Mauritius), INX Music, ASV Europa Security Private Limited, Halyard Health Inc (US) and Beloor Bayir Biotech.

Proposals of Tevapharm India Pvt, GMU Infosoft Pvt, U Infosoft Pvt Ltd, and Monsoon Capital LLC, US are also among these nine investment plans. Railways sector too has been opened to foreign investment and the government intends to hike FDI ceiling in insurance sector to 49%from the current 26%.

Standard Life to up exposure in HDFC Life, Bill for FDI in Insurance likely to be placed this week in Rajya Sabha – Positive for HDFC from short to medium term perspective

Standard Life plans to increase its stake in joint venture HDFC Standard Life Insurance Co to 33 per cent from the current 26 per cent after India amends its law increasing the limit of foreign investment in the insurance sector. According to news articles, the stake purchase will happen before HDFC Life lists its shares, which internal discussions suggest would be at a valuation of Rs 18,000-20,000 crore.

India currently limits foreign direct investment in insurance to 26 per cent. While Parliament has yet to clear the Insurance Amendment Bill, private insurance companies have already started activities around raising FDI. HDFC Life has an embedded value – present value of future profit plus adjusted net asset value – of Rs 7,800 crore as of September 30, 2014.

The two latest deals in the life insurance space -wherein Nippon Life bought a stake in Reliance Life and Mitsui Sumitomo’s deal with Max India – have valued the local insurers at 2-2.5 times the embedded value. Taking these as a benchmark, HDFC Life would be valued around Rs 20,000 crore.

As per the agreement, Standard Life can increase its stake in the company at a fair value. Besides, the promoters are also said to be in talks with Azim PRemji to sell a minority stake. Positive for HDFC from short to medium term perspective.

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