6-12 months time needed for PSU general insurers to hit the market

It will take anything between six to 12 months for the government owned insurance companies to come out with their initial public offering (IPO) allowed by the Union Cabinet on Wednesday, industry officials said.

The industry officials also told IANS that only from now will activities relating to public issue - enterprise valuation and other aspects - begin.

In a major decision on divesting stake in state-run general insurance companies, the cabinet on Wednesday approved the public listing of 5 firms by which the government's shareholding in them would be brought down to 75 per cent.

Speaking to reporters, Union Finance Minister Arun Jaitley said the cabinet has decided to publicly list the five insurance companies-New India Assurance Co, United India Insurance, Oriental Insurance, National Insurance Company and the national reinsurer General Insurance Corporation (GIC).

"With the public listing in more than one tranche under SEBI and IRDA guidelines, the government holding is to be brought down to 75 per cent," he added.

According to industry officials, New India Assurance and GIC could be the first two companies to be listed.

"It will be a combination of divestment by the central government and capital raising by the companies," G.Srinivasan, Chairman and Managing Director, New India Assurance told IANS over phone from Mumbai.

"The IPO size and other aspects has to be decided by the company board. If all things go well we may hit the market in six months time," he said.

However Srinivasan added that market condition at the time of coming out with the issue has to be considered.

As to the need for capital, he said the growth in business would necessitate capital.

"Our solvency ratio is 2.05 as against the stipulated 1.50. Nevertheless the business growth would necessitate fresh capital. We are logging a growth of 26 per cent," Srinivasan added.

He said no formal enterprise valuation has been done till date and the process would begin soon.

Senior officials of United India Insurance and Oriental Insurance told IANS that no enterprise valuation has been done.

"Enterprise valuation of a general insurance company is not an easy task. The Indian market and its dynamics are different and it is not possible to apply some formula used in foreign countries to Indian companies," a senior official of a public sector insurer who did not want to be named told IANS.

According to him it may take a company to come to the market with an IPO not before December 2017 as necessary approvals have to be obtained from the central government, insurance and securities markets regulators.

He said the valuation exercise has to be done.