Four general insurance companies to be listed on stock exchanges
MARKET BOUND Cabinet also approves proposal to sell stake in reinsurer GIC; govt to bring down holding in these firms to 75%
NEW DELHI: Soon, cash-starved public sector general insurance companies will be able to hit the market to raise capital.
In a major step, the Cabinet on Wednesday gave in-principle approval to a proposal to list state-owned general insurance firms, by issuing fresh equity or through the offer for sale route. The proposal was first announced by finance minister Arun Jaitley in last year’s budget.
The companies include New India Assurance, Oriental Insurance Company, National Insurance and United India Insurance, besides re-insurer General Insurance Corp of India (GIC). The government holding will gradually come down from 100% to 75% in all these companies.
The stake sale will happen in tranches, Jaitley said. The process of disinvestment will be undertaken according to the existing rules of the Securities and Exchange Board of India (Sebi) and the Insurance Regulatory and Development Authority of India (IRDAI).
“All procedural formalities are over... now the companies will have to comply with the listing requirements with exchanges and Sebi,” Jaitley added.
“This is another step in financial liberalisation, which will attract investments in this capital-intensive sector,” Rajiv Kumar, economist and founder, Pahle India Foundation, told HT.
Besides ensuring higher levels of transparency and accountability, the move will also help in price discovery or market value of these companies. It will also open more avenues for them to raise resources to meet their fund requirements, instead of being only dependent on the government for capital infusion.
“Listing of public sector general insurance companies will help the market discover the value for general insurance business in India, since there are no listed players currently. It is also expected to pave the way for listing of private sector general insurance companies in the next couple of years,” said Shashwat Sharma, partner and head of insurance, KPMG, India said.
Some, however, said the approval should have come much earlier, and these companies have already lost a large chunk of the market share to private insurers. According to Ashvin Parekh managing partner, APA Services, some of these companies may have to give huge discounts to counter these challenges.
The government has set a target of ₹56,500 crore from stake sale in public sector units for the current fiscal. It has managed to raise over ₹23,500 crore so far.