ICICI Pru Life in first foreign JV for pension fund in India

Unlike the life insurance industry, the newly opened up pension fund industry, which will see the entry of six players, will have only one foreign joint venture. The pension fund company to be set up by ICICI Pru Life Insurance company, which has received license along with other five leading players from the Pension Fund Regulatory and Development Authority (PFRDA), will be the first joint venture with a foreign partner in the country.

Confirming the development Shikha Sharma, managing director and CEO, ICICI Pru Life Insurance, said, "My company will be setting up the new pension fund company. Our partnership with the UK-based Prudential will continue in the pension fund company,'' she said.

Though government regulations allow 26% of foreign stake in a pension fund company, no other companies, which have already forayed into pension fund business or are planning to do so, have plans to team up with a foreign player. PFRDA, which had earlier shortlisted 15 leading players which are having either life insurance business or mutual fund business, has finally zeroed in on six players on the basis of the lowest fund management cost. The lowest bidding at Rs 9 for Rs 10lakh has been submitted by UTI MF.

The players which have been chosen are Reliance MF, ICICI Prudential Life Insurance, IDFC MF, SBI Pension Fund and Kotak MF and UTI MF.

However, none of these companies have received any official communication from the PFRDA.

Sandesh Kirkire, CEO, Kotak MF, said the proposed pension fund company would be a joint venture between Kotak Bank and Kotak Asset Management Company and would not have a foreign partner. Naval Bir Kishore, managing director, CEO, IDFC Mutual Fund, said the proposed pension fund company would be a joint venture between IDFC Asset Management Company and IDFC.

PFRDA after two rounds of bidding has selected six players as pension fund managers which will be allowed to manage the massive pension resources of the unorganised sector. UTI MF is believed to have quoted the lowest price of Rs 9 for managing fund of Rs 10 lakh.

Speaking to FE, UK Sinha, chairman and managing director, UTI AMC, said the earlier biddings for EPFO funds which were quite low had already set a some kind of benchmark for the cost of managing pension funds.

"Somewhere we never wanted to take any chance this time after witnessing the criteria for selecting the fund managers for EPFO finds and had quoted competitive pricing. I think this kind of cost to manage NPS funds may be non-remunerative," he said. However he said the cost structure managing NPS money may set a benchmark for other fund management business life insurance and mutual fund business.