General Insurance stake sale: Govt likely to earn Rs 4,700 crore from 6.8% divestment in GIC Re

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The government plans to sell a 6.8% stake in General Insurance Corporation of India (GIC Re) through an offer-for-sale. The shares will be priced at Rs 395 each, which is a 6% discount compared to Tuesday’s closing price. This move is expected to raise around Rs 4,700 crore, adding to the government’s disinvestment fund for the year.

Since major strategic sales are limited, except for IDBI Bank, the government is likely to focus on smaller share sales to meet its target of Rs 50,000 crore in disinvestment for the current financial year. The share sale will be conducted over two days: non-retail investors can bid starting Wednesday, while retail investors and GIC Re employees can place their bids on Thursday.

Currently, the government owns about 85.8% of GIC Re, India’s only reinsurance company that helps insurers manage risk. This sale is part of the government’s strategy to follow regulatory guidelines and reduce its stake in public sector companies. GIC Re’s initial public offering (IPO) in 2017 was valued at Rs 11,176 crore. For comparison, Coal India raised Rs 22,400 crore through an offer-for-sale in 2015.

GIC Re’s market cap is Rs 73,904 crore, and at the floor price, the market value is Rs 69,298 crore. The government plans to offer nearly 6 crore shares, which is 3.4% of GIC’s total capital. There is an option to sell up to 11.95 crore shares if the oversubscription option is fully used.

Out of the total offer, 50,000 shares are reserved for GIC Re employees. Retail investors can bid at the floor price or a ‘cut-off price,’ which will be set based on the previous day’s sales to non-retail investors.

At least 25% of the shares are set aside for mutual funds and insurance companies, while 10% are reserved for retail investors. The offer might be canceled if there are not enough bids above the floor price or if there are settlement issues. The sale will be available on both the BSE and NSE.

In Q1 FY25, GIC Re reported a 42% increase in net profit, reaching Rs 1,036 crore, up from Rs 731 crore last year. Gross premium income rose by 39% to Rs 12,406 crore from Rs 8,918 crore. However, investment income dropped by 21.5% to Rs 2,007 crore. The incurred claims ratio improved to 89.8% from 95.1%, and the combined ratio decreased to 109.6% from 118.5%.

(With ToI inputs)



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