Public sector insurance firms kick off share sale process, appoint investment bankers
State-owned insurance companies New India Assurance Co Ltd (NIA) and General Insurance Corp of India Ltd (GIC) have appointed investment banks to manage their initial share sales as the government looks to divest its stake these enterprises, said three people aware of the development.
The two initial public offerings of the insurers could see the government collectively raise well over ₹10,000 crore from these offerings, they said.
“NIA had held investment bankers presentation on Saturday afternoon at its headquarters in Mumbai. They have appointed Axis Capital, Kotak Mahindra Capital, Yes Bank, IDFC Capital and Nomura to manage the IPO,” said one of the three people cited above, requesting anonymity.
According to a second person cited above, the NIA divestment will include both a primary and a secondary offer for sale.
“A part of the proceeds from the divestment will go to the government and another part will go to the company’s books. The company is planning to divest a total of around 12-15%. The total value of the stake sale could be RS. 7,000-8,000 crore,” he said.
NIA has a solvency margin of around 2.2% which is much stronger than what required by insurance sector regulator, which is 1.5%, so they don’t need to raise too much capital for themselves, he said. “The industry is growing at a faster rate of around 30%. If a part of the IPO proceeds goes to the company , it will only help to support the fast growth by capital contribution without diluting the solvency margin” he added.
“Today, no general insurance company is listed. The idea is to get listed and set a benchmark for the industry,” said G Srinivasan, CMD at New India Assurance.
The listing will take another 5-6 months, he said. “The government has to finalize the amount of stake to be divested, which I think we will know in a month’s time. The money raised from the divestment will be used for funding the company’s growth and expansion plans” he added.
Also, last week on Thursday, GIC also picked up five investment banks to manage its IPO. Citibank, Axis Capital, Kotak Mahindra Capital Co Ltd, Deutsche Bank and HSBC were appointed by GIC. “The GIC IPO is expected to be at least ₹7,000 crore in size. The government is divesting 10% stake in GIC, which means the company will be valued at least ₹70,000 crore,” said the third person cited above, also requesting anonymity.
Citibank, HSBC and Deutsche Bank declined to comment on the development. Emails sent on Friday evening to GIC, Axis Capital, Kotak Mahindra Capital did not elicit any response.
The two IPOs will be the first government insurance firms to hit the public markets. Last year the Indian primary markets saw the first initial public offering of an insurance company that of ICICI Prudential Life Insurance Co Ltd, which raised ₹6,000 crore through its IPO.
Appointment of banks to manage the share sales of the two insurance firms is part of the government’s aggressive divestment plans, which has seen the Department of Investment and Public Assets Management put out ‘request for proposals’ for over a dozen state-owned companies either through IPOs or offer for sale or strategic divestments.
To abide by the mandated 25% public shareholding in companies and unlock their value, the Cabinet Committee on Economic Affairs (CCEA) on April 13 approved listing of 11 central public sector enterprises (CPSEs) in the equity market, Mint reported.
The list includes railway subsidiaries Rail Vikas Nigam Ltd, IRCON International Ltd, Indian Railway Finance Corp Ltd, Indian Railway Catering and Tourism Corporation Ltd (IRCTC) and RITES Ltd.