Although the government has cleared the listing process of five state-owned non-life insurance companies, two of the country’s leading public sector insurers – General Insurance Corporation of India (GIC Re) and New India Assurance — have not yet decided how much money is to be raised from their forthcoming initial public offerings (IPOs). Last week, the two insurance companies also had a meeting with Department of Investment and Public Asset Management (DIPAM).
New India Assurance has selected Nomura Financial Advisory & Securities (India), Kotak Mahindra Capital Company, Yes Securities, IDFC Securities and Axis Capital as its merchant bankers. GIC Re, the state-owned reinsurer, has also selected five merchant bankers – Citi Group Global Markets, Axis Capital, Kotak Mahindra Capital, Deusche Equities India and HSBC Securities and Capital Markets. “We have appointed merchant bankers for the issue, but we are yet to finalise how much amount will be raised from the IPO. Our talks with DIPAM are in the final stages and we will know exact amount in the next few days,” said a senior official privy to the development. However, participants from the insurance industry believe both the companies could collectively raise Rs 8,000-Rs 10,000 crore from their IPOs.
In January this year, the cabinet committee of economic affairs (CCEA) had approved the listing of the five state-owned general insurance companies and reducing the governments stake in them from 100% to 75%. The five state owned insurers are New India Assurance, Oriental Insurance, National Insurance, United India Insurance and GIC Re.
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Senior officials in the insurance industry say they are expecting a price to book multiple of anywhere between 1.2 and 1.5 times while offering their shares to the public. The government can raise anywhere between Rs 18,400 crore and Rs 23,000 crore by offloading their 25 % stake in five companies. However, they added that this is the base case scenario and government might be able to raise more money if the market are conducive.
New India Assurance, which has the highest market share of nearly 15%, saw its gross direct premium at Rs 19,065.07 crore a surge by 25.85% in the last financial year, shows the data from Insurance Regulatory and Development Authority of India (Irdai). While general insurance industry saw their gross direct premium at Rs 1.27 lakh crore in the last financial year as against Rs 96,376.40 crore in FY 2015-16 a growth of around 32%.
“We are expecting that both the IPO would be out by third quarter of current financial year, however listing of another three companies would be out only in the next fiscal,” said senior official from the insurance industry.