According to Sanket Kawatkar, head of life insurance consulting for Milliman India, which has conducted valuations for 17 of the 24 companies, “A large component of the valuation would include softer aspects – the keenness of the foreign partner to do business n India and the desire to continue with the Indian partner.” This is weighed with the fact that, under the new norms, multinationals can no longer enter into agreements, which give them a veto power.

Companies’ promoters are now scrambling to find out the worth of the business they have invested in. The traditional method of computing an insurance firm’s valuation would be to arrive at an embedded value -a number which factors in not just present earnings but also takes into account future profits. But this global measure is not the basis on which deals are being worked out. Foreign promoters running joint ventures will suddenly find themselves in a weaker position than they were in before the legislation allowing 49 percent was passed. This has changed the dynamics and many are unwilling to pay the premium they might have done earlier. In the case of Reliance Life, the deal for sale of an additional 23 percent stake to Nippon Life valued the company at Rs 10,000 crore -marginally lower than the Rs 11,500 crore at which the earlier investment was done.