1. Rs 11,370 crore GIC IPO kicks off today: 7-point guide to India’s 2nd largest public offer

Rs 11,370 crore GIC IPO kicks off today: 7-point guide to India’s 2nd largest public offer

General Insurance Corporation Rs 11,370 core IPO (initial public offering) is all set to open for subscription today. We take a look at seven key things to know about India's third-largest public offer.

By: | Updated: October 11, 2017 9:50 AM
Godrej Agrovet, Godrej Agrovet ipo, Godrej Agrovet ipo subcription General Insurance Corporation Rs 11,370 core IPO (initial public offering) is all set to open for subscription today. (Image: Reuters)

General Insurance Corporation Rs 11,370 core IPO (initial public offering) is all set to open for subscription today. The company has set a price range for the issue between Rs 855 to Rs 912 per equity share. GIC’s Rs 11,370 crore IPO is India’s second-largest public offer since Coal India’s Rs 15,200 crore and Reliance Power’s Rs 10,123.2 crore share sale — which was at the second spot before GIC IPO, now become the third-largest.

The public offer will remain open for three days starting today to Friday (October 13). At the upper end of the price range, the company is expected to raise Rs 11,372.64 crore. General Insurance Corporation is first of the five state-run non-life insurance firms to initiate a stake sale and listing process. We take a look at seven key things to know about India’s second-largest public offer.

General Insurance Corporation is offering a total of 12.47 crore equity shares of face value Rs 5. It includes a fresh issue of 1.72 crore shares and an offer for sale of 10.75 crore shares. About 5.92 crore shares were set aside for the qualified institutional buyers (QIB) category, 31.17 lakh shares have been reserved for mutual funds; 1.87 crore shares for non-institutional investors and 4.36 crore shares for retail buyers. Citigroup Global Markets India Private Limited, Axis Capital Limited, Deutsche Equities India Private Limited, HSBC Securities and Capital Markets (India) Private Limited, Kotak Mahindra Capital Company Limited are the book running lead managers of the issue.

IPO proceeds
The company will not receive any proceeds from the offer for sale. However, the net proceeds from the fresh issue will be utilised towards augmenting the capital base of the organisation to support the growth of business and to maintain current solvency levels and for the general corporate purposes which are subject to applicable law. The fund requirements for the objects are based on internal management estimates and have not been appraised by any bank or financial institution.

Financials
As far as the financial position is concerned GIC had reported a rise of in most of the premiums earned across various business segments. The consolidated fire insurance business premium rose 20.67% to Rs 5,595.89 crore for the financial year 2017-2017 as compared to Rs 4,637.2 crore; marine insurance business and life insurance business premiums slightly fell to Rs 910.39 crore and 239.14 crore, respectively for the corresponding period. While the consolidated premium for the miscellaneous insurance business had doubled to Rs 19,629.27 crore for the financial year ended 31 March 2017 versus Rs 9,540.99 crore in the previous year. The company has posted an 11.7% increase in the consolidated net profit to Rs 3,004.21 crore as compared to last year’s Rs 2,689.58 crore.

Business profile

General Insurance Corporation is the largest reinsurance company in India in terms of gross premiums accepted in the financial year 2017, and accounted for approximately 60% of the premiums ceded by Indian insurers to reinsurers during FY 2017, according to CRISIL Research. The gross premiums have grown at a CAGR of 24.84% from FY 2015 to FY 2017.

Company profile
The company was incorporated at Mumbai on 22 November 1972 as General Insurance Corporation of India, a private limited company under the Companies Act, 1956. Following a resolution passed by our shareholders on 4 February 2016 and approval of the central government dated 8 January 2016, GIC was converted into a public limited company with effect from 7 March 2016. Consequently, the Registrar of Companies, Mumbai issued a fresh certificate of incorporation dated 7 March 2016. GIC is registered with IRDAI (Insurance Regulatory Authority of India) for carrying on reinsurance business pursuant to the registration certificate dated 2 April 2001.

IPOs so far
About Rs 38,000 crore has been raised through the public offers so far this year. India has set for a record year aided by strong stock markets and higher fund flows into equity from institutions as well as retail investors. Higher valuations of share sales have however concerned some investors. To help bring the fiscal deficit meet a target of 3.2% of gross domestic product during the year to March 2018, the government aims to raise about Rs 72,000 crore by divesting some of its stakes in state-run companies and private firms in which it holds minority stakes.

Clearing the decks
Earlier this year, the Union Cabinet approved the listing of five state-run general insurance companies, clearing the way for the government to further accelerate its plans to raise money through disinvestment of equity stakes in PSUs. The government holds entire 100% stake in all the five state-run general insurance companies, namely, New India Assurance Company, National Insurance Company, Oriental Insurance Company, United India Insurance Company and a reinsurance firm General Insurance Corporation.)

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