Cabinet OKs listing general insurance companies in a boost to divestment plan

By: |
January 18, 2017 3:59 PM

Cabinet has approved listing of the five general insurance companies as was announced by Finance Minister Arun Jaitley in the last year's Budget.

Stake sale - disinvestmentCabinet OK for listing 5 general insurance companies accelerates government’s fundraising through disinvestment of equity stake in PSUs.


The government has approved listing of five state-run general insurance companies, Finance Minister Arun Jaitley said on Wednesday. This clears the way for the government to further accelerate its plans to raise money through disinvestment of equity stakes in PSUs (public sector undertakings), following its other similar recent initiatives.

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 re-insurance firm General Insurance Corp.

Jaitley said the government holding in these five companies will gradually fall to 75% post listing. This is in line with India’s listing requirements as mandated by the regulator.

The listing may include both, issuing fresh shares with the proceeds going to the companies itself, and offer for sale of existing shares with the proceeds going to the seller – the government. However, it was not immediately clear if the government is targeting listing of all five companies in the current financial year itself.

Jaitley, earlier last year in his budget proposals, had said that the government proposed to undertake important banking sector reform and public listing of public sector general insurance entities. India has already raised the foreign direct investment limit in insurance sector to 49% from 26%.

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Earlier this month, Disinvestment Secretary Neeraj Kumar Gupta said that the government aims to “soon” kickstart the process of the strategic sale of equity stakes in public sector undertakings to meet its disinvestment revenue target for the current financial year. The government has created a pipeline for strategic stake sale, Gupta had said in an interview to ET Now.

Disinvestment to raise funds

The Indian government has undertaken strategic sale of stake in profitable PSUs to help boost up state revenue and bridge the fiscal deficit but has repeatedly fallen short of its disinvestment targets in the past. It has a target to earn Rs 56,500 crore by divesting its stake in public sector undertakings in the current financial year 2016-17, and has already garnered Rs 23,500 crore so far this fiscal through share sale and share buyback by the companies.

Manish Singh, Joint Secretary in Department of Investment and Public Asset Management (DIPAM) under Ministry of Finance, said earlier this month that the government is confident of achieving the remaining 60% in the next two-and-a-half months. He added that the government has all the options open including strategic share sale, minority disinvestment and further stake sale.

The Cabinet Committee on Economic Affairs had in October given in-principle approval for strategic stake sale in central public sector enterprises (CPSEs), facilitating the government’s agenda and helping it take measures to meet its revenue targets for the year. The approval was based on the recommendations of the Core Group of Secretaries on Disinvestment.

The immediate candidates lined up for disinvestment include the state-run helicopter services company Pawan Hans Ltd and the CPSE ETF (exchange traded fund).

Other listing candidates

The government has launched a follow on public offer this week. for its CPSE ETF – the exchange-traded fund mandated to invest in 10 PSUs. It hopes to raise up to Rs 6,000 crore in the issue, which includes a greenshoe option of Rs 1,500 crore. The CPSE ETF, which mirrors the performance of the CPSE index, invests in ONGC, Coal India, Indian Oil Corp, Gail India, Oil India, Power Finance Corp, Bharat Electronics, Rural Electrification Corp, Engineers India and Container Corporation of India.

As for Pawan Hans, the government is learnt to have invited bids to appoint merchant bankers for selling its entire 51% stake. The remaining 49% stake in the company is held by another state-run giant Oil and Natural Gas Corp. Disinvestment of Pawan Hans was proposed as early as in 1997, by the then Disinvestment Commission.


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