Disinvestment insured: After GIC, now New India Assurance queues up for Rs 10,000 crore IPO

By: | Updated: August 10, 2017 5:48 PM

Government’s disinvestment agenda got another leg up this week with second state-run non-life insurance company stepping forward to come up with an IPO for sale of shares.

The DRHP revealed that New India Assurance plans to sell a total of 12 crore shares in the IPO. (Image: Reuters)

Government’s disinvestment agenda got another leg up this week with second state-run non-life insurance company stepping forward to come up with an IPO for sale of shares. New India Assurance Company yesterday filed a draft prospectus with market regulator SEBI for its proposed IPO, which could net the government up to about Rs 8,000 crore out of a total IPO size of over Rs 10,000 crore, according to various news reports.

Another news report pegged the total IPO size at about Rs 6,300 crore. The DRHP revealed that New India Assurance plans to sell a total of 12 crore shares in the IPO, including a fresh issue of 2.4 crore equity shares, and an offer for sale of 9.6 crore shares held by the government. The IPO will constitute 14.6% of the company’s post-issue share capital, and will bring down the government’s stakeholding in New India Assurance to 85.4%.

New India Assurance has hired Kotak Mahindra Capital Co. Ltd, Axis Capital Ltd, IDFC Bank Ltd, Nomura Financial Advisory and Securities (India) Pvt Ltd and YES Securities (India) Ltd to as managers to the public issue. manage the public offering. It expects to launch the IPO in mid-November. The state-run company said it plans to use its share of the proceeds of the issue to augment its capital base to support growth of its business and maintain solvency levels.

Just a couple of days earlier, General Insurance Corp became the first state-run non-life insurance company to approach the regulator for its IPO. General Insurance Corp IPO is also expected to garner a total of about Rs 10,000 crore, including about Rs 8,500 for the government. The combined share sale in both the insurance companies could provide a significant boost to the disinvestment programme of the government, which has an ambitious target to raise Rs 72,500 crore this fiscal year by selling equity stakes in PSUs.

Clearing the decks

Earlier this year, the Union Cabinet approved listing of five state-run general insurance companies, clearing 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 Corp.

New India Assurance Company’s Chairman and Managing Director G Srinivasan had earlier said that his company might possibly be among the first one to list. Though, for now, General Insurance Co has taken the pole position. Finance Minister Arun Jaitley had 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.

After being in a slow gear for a better part of the fiscal first quarter this year, the government’s ambitious disinvestment programme has recently taken off in a big way, what with the launch of an exchange-traded fund Bharat-22, putting four defence companies up for a stake sale, and readying the state-run helicopter services provider Pawan Hans Ltd for an IPO.

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