General Insurance Corporation plans to raise Rs 11K cr; sets Rs 855-912 price range

GIC Re’s issue will be third biggest in the history of the domestic markets after Coal India and Reliance Power. Coal India had raised Rs 15,470 crore in October 2010 and Reliance Power raised Rs 11,700 crore in 2008. Last month, two insurance companies, SBI Life and ICICI Lombard had raised Rs 8,400 crore and Rs 5,700 crore respectively through their IPOs.

The IPO is part of the government’s disinvestment programme. So far in FY18, the government has raised Rs 19,758 crore through disinvestment and strategic disinvestment of public sector enterprises as against its target of Rs 72,500 crore. GIC Re’s IPO could fetch about Rs 9,804 to the government and remaining Rs 1,568.64 crore to GIC Re.

As per its red herring prospectus, the company accounted for approximately 60 per cent of the premium ceded by Indian insurers to reinsurers during FY 2017. The offer comprises of a fresh issue of 1.72 crore shares and an offer for sale of 10.75 crore shares. Retail investors and eligible employees of the company will get a 5 per cent discount. The offer constitutes 14.22 per cent of the post-offer paid-up capital. Post offer, the government holding will come down to 85.78 per cent.

The company’s gross premiums in FY 17 stood at Rs 33,741 crore and it posted a net profit Rs 3140 crore. The company’s gross premium grew at a compounded annual growth rate of 48.65 per cent from FY15 to FY17. The company’s net profit grew at a CAGR of 4.23 per cent during the same period.

“The reinsurance market in India is worth Rs 38,800 crore and GIC has 60 per cent share of it. The reinsurance market has been growing at a CAGR of 11 to 14 per cent. The healthy Indian GDP growth, rising income, low insurance penetration levels, the protection gap between economic and insured losses will drive reinsurance industry growth,” said Alice G Vaidyan, chairman and managing director, of GIC.