While the government will offload 5-10% of its holdings in the proposed initial public offers (IPOs) by state-owned general insurance companies, these companies would issue fresh shares in their bid to raise capital to expand business, sources told FE.

The Cabinet will soon take up the listing proposals of the insurance companies, an official said. Besides re-insurer General Insurance Corporation (GIC Re), four general insurers — New India Assurance, National Insurance Company, Oriental Insurance Company and United India Insurance Company — will be listed one-by-one over three years.

GIC Re, India’s only reinsurance company, will likely to be the insurance company to list in the exchanges by December this year. GIC will be likely followed by New India early next year.

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“The IPO will likely be a mix of fresh equity shares to be issued by the companies and 5-10% stake offloaded by the government,” an official with knowledge on the matter said. The official said the insurance IPOs are likely to command a good price as non of the insurance companies (public or private) are listed, helping the government augment its non-debt capital receipts.

The additional revenue would help the government accommodate likely increase in capital infusion in public sector banks. The capital infusion PSBs is budgeted R25,000 crore for FY17, but the Centre is likely to infuse up to R30,000 crore in one go shortly to cushion banks against sharp increase in bad loans and lending growth.

While public sector banks were hit hard by rising NPAs after RBI-mandated asset quality review in the second half of FY16, the insurance companies were largely unaffected in the recent economic slowdown. GIC’s robust performance in recent years has made it the first candidate for listing among state-owned general insurers. GIC Re’s profit after tax (PAT) rose 6% to R2,848 crore in FY16. The net worth of the company stood at R38,281 crore, including fair value change account at March-end 2016.

New India IPO is expected in early 2017 to help the company fund its business growth plans. It has posted a profit after tax of R829 crore in FY16, down 42% from the year-ago period, partly on account of loss due to the Chennai floods. However, it still commanded nearly 16% market share in domestic general insurance premium income underwritten in FY16.