I-banks to manage share sale process
New India Assurance Co. Ltd (NIA) and General Insurance Corp of India Ltd (GIC) have hired investment banks to manage their initial share sales as the government seeks to pare its stake in the state-run insurers, according to three people aware of the development.
The government is likely to raise more than ₹10,000 crore by selling its shares to the public, 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 initial public offering (IPO),” said one of the three people cited above, requesting anonymity as he is not authorized to speak to reporters.
The NIA IPO will include the sale of the government’s stake and new shares, said the second of the people cited above. “A part of the proceeds from the divestment will go to the Centre and the other to the company’s books. The firm is planning to divest 12-15%. The total value of the stake sale could be ₹7,000-8,000 crore,” this person said.
NIA has a solvency margin of around 2.2%, better than the 1.5% minimum mandated by the insurance regulator, limiting the need for additional capital for the insurer, the person said.
“The industry is growing at a fast 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 chairman and MD, NIA. The list ing will take another five to six months, he added. “The govern ment has to finalise 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 fund ing the company’s growth and expansion plans.”
On Thursday, GIC also selected five investment banks to manage its IPO. Citibank, Axis Capital, Kotak Mahindra Capita Co Ltd, Deutsche Bank and HSBC were hired 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 val ued 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 Fri day evening to GIC, Axis Capita and Kotak Mahindra Capital were not answered.
NIA and GIC will be the first state-run insurance firms to go public.