Public sector insurers get board nod to list on stock exchanges

WIDER UMBRELLA Cabinet to take up proposals soon; companies to decide on timing of IPOs

NEWDELHI: Boards of public sector general insurance companies — National Insurance, Oriental Insurance, New India Assurance and United India Assurance — have given their approval for initial public offerings (IPOs). The proposals will now be sent to the Cabinet, which is likely to take up the issue soon, sources said.

The government recently instructed these companies to move a board resolution to list their companies on the stock exchanges.

The Central government, which holds 100% in these firms, is looking to sell around 15% stake, with the IPO of New India Assurance likely to be the first on the block. It may pare down its stake further, while maintaining the “public sector” character of these companies.

Once the approval comes, the companies will decide on the “exact time” of listing depending on market conditions, sources added.

“There is no estimate on how much can be raised, as public offers from insurance companies per se are new,” said a senior government official, who refused to be identified.

Industry sources, however, said the government is likely to mop up around ₹10,000 crore from these IPOs.

No insurance company is currently listed on the stock market. Among others, HDFC Life and ICICI Prudential recently announced plans to launch IPOs.

“Public shareholding in government-owned companies is a way to ensure higher transparency and accountability. To promote this objective, the general insurance companies owned by the government will be listed in the stock exchanges,” finance minister Arun Jaitley had said in his Budget speech. The Insurance Laws (Amendment) Act 2015 enables the government to dilute stakes in state-owned insurance companies by up to 51% to raise capital keeping in mind the need for expansion of business.

“We expect that the process of listing of the insurance companies will begin one-by-one. Modalities are being worked out and I think we should see lot of action on that front in the next few months,” economic affairs secretary Shaktikanta Das had said last month.

The government is looking to bring down the fiscal deficit to 3.5% of gross domestic product (GDP) in 2016-17, from 3.9% in the previous fiscal. It has set a disinvestment target of ₹56,500 crore for the current fiscal, down from ₹69,500 crore in 2015-16. Of this, ₹20,500 crore is set to be achieved from strategic sale in state-owned companies.

“Even if the disinvestment target has been brought down, the amount fetched from the IPO of insurers will help the government (in meeting the set figure),” a finance ministry official said.

The going has been tough for these general insurance companies in the last few years, with most of them pricing their products in portfolios, such as motor and group medical health, at lower premiums. Claims, however, have been on the higher side.