Just days after the launch of government’s ETF Bharat-22 and a public notice for stake sale in four defence companies via IPO for sale of shares, the government’s disinvestment agenda got another major boost with the state-run reinsurer General Insurance Company filing a draft prospectus with market regulator SEBI for its proposed IPO. General Insurance Co is first of the five state-run non-life insurance firms to initiate a stake sale and listing process.
The offer comprises a fresh issue of 1.72 crore shares and an offer for sale of 10.75 crore shares by the government of India. Following the IPO, the government’s stake in the reinsurance firm will reduce by 14.22%, according to the DRHP (draft red herring prospectus). General Insurance Co will not receive any proceeds from the offer for sale of the government’s shares, while the net proceeds of the fresh issue will be utilised towards augmenting the capital base of the company to support the growth of business, to maintain current solvency levels; and general corporate purposes.
The offer is will be made through the book building process, and up to half of it will be allotted on a proportionate basis to Qualified Institutional Buyers (QIBs). Further, at least 15% of the offer shall be available for allocation on a proportionate basis to non-institutional bidders and at least 35% of the offer shall be available for allocation to retail investors.
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 Co could be the next one to come forward with its formal IPO process. Its Chairman and Managing Director G Srinivasan 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 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.
Earlier last year in his budget proposals, Jaitley 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%.