New Delhi : Only two out of the five state- owned general insurance companies are likely to be listed on the stock exchanges in the current financial year, official sources said. The two state-owned general insurance companies, New India Assurance (NIA) and GIC Re, are gearing up to hit the capital market over the next few weeks. The listing would be done in staggered manner for better market response, sources said. The government had estimated to garner about Rs 11,000 crore by diluting its stake in insurance companies as part of disinvestment plans for the current fiscal.
In view of the current market condition, the government may easily get Rs 15,000 crore by diluting stake in these two companies, sources said, adding it could be upwards of Rs 15,000 crore. Initial public offer (IPO) is part of the government’s plan to list four state-owned non-life insurers and the national reinsurer.
These listings would help the government meet its ambitious disinvestment target of Rs 72,500 crore for the current fiscal. In the case of GIC Re, the government will be selling 10.75 crore shares, whereas GIC Re itself is likely to sell 1.7 crore shares through IPO. Thus, a total of 12.4 crore shares of the reinsurer would be sold through the share sale offer, constituting 14.22 per cent of the company’s post issue share capital, as per the filing of the company.
The company registered a profit-after-tax of Rs 3,127 crore in 2016-17, an increase of 9.8 per cent over the previous year. The net worth of the company stood at Rs 47,983 crore. In another listing, the government will sell 9.6 crore shares of New India Assurance while the company will issue 2.4 crore new shares through the IPO. A total of 12 crore shares of the non-life insurer would be sold through the share sale offer, constituting around 14.56 per cent of the company’s post issue share capital.
Insurance penetration crossed 1% in FY17
Even though the non-life insurance industry has breached the magical figure of 1 per cent penetration in terms of GDP in FY2017, the industry believes there is tremendous potential to double the figure in the next five years, say insurers. After hovering around 0.7-0.8 per cent for several years, the penetration ratio of non-life insurance industry has moved up to 1.04 per cent in March 2017, based on the revised GDP figure.
This took the industry size to Rs 1.27 trillion, as per data collated by the industry body General Insurance Council, and was driven mainly by around the Rs 21,000 crore premium coming in from Prime Minister Crop Insurance Scheme.
As per the Central Statistical Office, real GDP grew to Rs 121.9 trillion in FY17, a growth of 7.1 per cent over Rs 113.81 trillion in FY16. When it comes to the general insurance industry, its business grew 33 per cent to Rs 1.27 trillion in FY2017 from Rs 96,000 crore in FY2016, or in terms of penetration at 1.04 per cent from 0.85 per cent in FY2016.