ECGC to get Rs 4,400-crore govt capital support; IPO in FY23

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September 30, 2021 3:15 AM

ECGC was set up in 1957 to offer credit insurance services to exporters against risks of non-payment by overseas buyers. It also provides insurance cover to banks against risks in export credit lending to exporters.

The company has recorded “continuous surplus and made dividend payments to the government for the last 20 years”. Its IPO, therefore, should be received well by the market, Goyal said.The company has recorded “continuous surplus and made dividend payments to the government for the last 20 years”. Its IPO, therefore, should be received well by the market, Goyal said.

The government will launch the initial public offering (IPO) of ECGC in FY23 to “unlock its true value” and infuse a capital of Rs 4,400 crore into the company, which has an 85% share in the country’s export credit insurance market, over the next five years.

The infusion will improve ECGC’s underwriting capacity by Rs 88,000 crore and help additional exports of Rs 5.28 lakh crore over five years, commerce and industry minister Piyush Goyal said after the Cabinet approved the proposal on Wednesday. It will also help generate 5.9 million jobs, including 2,60,000 in the formal sector.

The Cabinet also decided to continue the National Export Insurance Account (NEIA) scheme and approved an infusion of Rs 1,650 crore into the NEIA Trust over five years. This will help the Trust support project exports worth up to Rs 33,000 crore and create 2,60,000 new jobs, including 12,000 in the formal sector.

The comfort of wider insurance cover is the latest in a series of steps, including the decision to set aside Rs 56,027 crore to clear all past dues owed to exporters and the roll-out of export tax refund schemes, initiated by the government to better enable exporters to take advantage of a recent resurgence of merchandise demand in advanced economies.

The proposals to infuse capital into ECGC and NEIA Trust were part of the government’s Rs 6.29-lakh-crore relief package, announced on June 28, to soften the blow of the second Covid wave. The detailed proposals have now been endorsed by the Cabinet.

Goyal said the government will infuse Rs 500 crore into ECGC this fiscal and another Rs 500 crore in FY23. Subsequently, based on ECGC’s requirement, the remaining amount will be released.

The company has recorded “continuous surplus and made dividend payments to the government for the last 20 years”. Its IPO, therefore, should be received well by the market, Goyal said.

The listing will also enable ECGC to mobilise fresh capital from the market either through the IPO or through a follow-on public offer and thereby substantially bolster its ability to settle claims, according to the commerce ministry.

ECGC was set up in 1957 to offer credit insurance services to exporters against risks of non-payment by overseas buyers. It also provides insurance cover to banks against risks in export credit lending to exporters.

The various insurance products offered by ECGC supported exports worth Rs 6 lakh crore in FY21, or 28% of total outbound goods shipment. As many as 97% of the exporters supported by ECGC are small and medium enterprises.

ECGC also insures around 50% of total export credit disbursement by banks, covering 22 lenders — 12 public sector banks and 10 private ones. Over the past decade, it has settled claims of more than Rs 7,500 crore. It now intends to raise its maximum liabilities—the highest amount of claims that the insurer is liable to pay during a single policy period—to Rs 2.03 lakh crore from Rs 1 lakh crore by FY26.

A Sakthivel, president of the exporters’ body FIEO, said, “It is the most timely move, as the growing uncertainties in global trade are making exporters jittery and defaults are growing.”

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