Govt may reduce stake in New India Assurance
After the initial public offerings of General Insurance Corp and New India Assurance last year, the Centre is planning to offload its stake further in the two firms with offers for sale later this year. The Centre’s plan to merge National Insurance, Oriental Insurance and United India Insurance has been put on the backburner for now. ARUP ROYCHOUDHURY writes
After the initial public offerings (IPO) of General Insurance Corp (GIC Re) and New India Assurance (NIA) last year, the Centre is planning to offload its stake further in the two companies with offers for sale (OFS) later this year, Business Standard has learnt.
Additionally, the Centre’s plan to merge National Insurance, Oriental Insurance as well as United India Insurance and list the merged company has effectively been put on the backburner for now.
This is because officials said that merging the three companies will be a time consuming process.
GIC Re’s IPO was rolled out in October and was India’s third biggest then. It was oversubscribed 1.37 times and fetched the exchequer ~97 billion. New India Assurance’s IPO was launched in November. But it wasn’t received as well, and with the support of Life Insurance Corporation (LIC), which bought stake, the exchequer received ~76.5 billion.
“Once the one-year lock in period for these two companies end, we are considering OFS for them later this year. The quantum and percentage of stake to be sold through the exchanges is still being decided,” said a senior government official. The Centre currently holds 85.7 per cent share in GIC Re and 85.4 per cent in NIA.
“The merger of the three insurers and subsequent IPO would have been a big-ticket move in terms of proceeds, as the Centre would have earned money in the merger as well as the listing process,” said another official. “Merging the three insurers is a mammoth task, and the Department of Financial Services has its hands full with a lot of banking sector issues. Hence, the proposal is not being taken up now. Merging itself will take more than a year. The listing will only happen after that and take more time,” the official added.
The move was first announced by Finance Minister Arun Jaitley in his 2018-19 Union Budget speech.
Officials in the Department of Investment and Public Asset Management are still hoping to get something out of general insurers, hence the plan for the OFSs of GIC and NIA. With the scrapping of Air India’s privatisation, the Centre now faces an uphill task as it looks to meet a budgeted estimate of ~800 billion from disinvestment.