General Insurance Corporation of India (GIC Re), India’s largest reinsurer, is planning to raise around Rs 11,372 crore from its initial public offering (IPO). The company has set a price band of Rs 855- 912 per share for its IPO and when calculated at the upper band of the issue price the company will be valued at around Rs 80,000 crore.
The issue will open on October 11 and close on October 13. There will be no anchor allotment for this issue. Bids can be made for a minimum of 16 shares and multiples of 16 thereof.
GIC Re’s issue will be the third biggest in the history of the domestic markets after Coal India and Reliance Power. Coal India had raised Rs 15,470 crore in October 2010 and Reliance Power raised Rs 11,700 crore in 2008. Last month, two insurance companies, SBI Life and ICICI Lombard had raised Rs 8,400 crore and Rs 5,700 crore respectively through their IPOs.
The IPO is a part of the government’s disinvestment programme. So far in FY18, the government has raised Rs 19,758 crore through disinvestment and strategic disinvestment of public sector enterprises as against its target of Rs 72,500 crore. GIC Re’s IPO could fetch about Rs 9,804 crore to the government and remaining Rs 1,568.64 crore to GIC Re.
According to its red herring prospectus (RHP), the company accounted for approximately 60% of the premiums ceded by Indian insurers to reinsurers during FY 2017. The IPO is scheduled to open on October 11 and close on October 13. The offer comprises of a fresh issue of 1.72 crore shares and an offer for sale of 10.75 crore shares.
Retail investors and eligible employees of the company will get a 5% discount. The offer constitutes 14.22% of the post-offer paid-up capital. GICRe is a fully owned government company and post offer the government holding will come down to 85.78%.
The company’s gross premiums in FY 17 stood at Rs 33,741 crore and it posted a net profit Rs 3,140 crore. The company’s gross premium grew at a compounded annual growth rate (CAGR) of 48.65% from FY 15 to 17. The company’s net profit grew at a CAGR of 4.23% during the same period.
“The reinsurance market in India is worth Rs 38,800 crore and GIC has 60% share of that market. The reinsurance market has been growing at a CAGR of 11 to 14%. The healthy Indian GDP growth, rising income, low insurance penetration levels, the protection gap between economic and insured losses will drive reinsurance industry growth,” said Alice G. Vaidyan chairman and managing director of GIC Re.
As of June 30, 2017, the company underwrote business from 161 countries. The company provides reinsurance across many business lines including fire (property), marine, motor, engineering, agriculture, aviation/space, health, liability, credit and financial and life insurance.
In 2017, 24 companies raised Rs 30,682 crore through IPO. Listing gains and returns by newly listed companies as also the positive sentiment in the broader market are among the reasons attributed to the trend.
SBI Life, CICI Lombard, BSE, HUDCO, CDSL, Avenue Supermarts, Shankara Building Products, S Chand and Company, and Cochin Shipyard are some of the companies who completed their IPO in the last nine months.
The newly listed companies have given good returns to investors, the BSE IPO index a gauge of newly listed companies rose by 41% year to date.