Getting closer to listing their shares on the stock exchanges, two of India’s leading public sector insurance companies have selected merchant bankers and initiated discussions with the concerned parties to launch their IPOs. With New India Assurance (NIA) and GIC Re expected to sell 10-25 per cent of the capital, the government is likely to mobilise around Rs 10,000 crore from the divestment. NIA, the largest general insurer in India, has chosen five merchant bankers to manage its proposed initial public offering (IPO). The merchant bankers selected by the NIA are Nomura Financial Advisory & Securities (India), Kotak Mahindra Capital Company, Yes Securities, IDFC Bank and Axis Capital.
There were seven merchant bankers which had bid for the NIA’s IPO mandate and those who couldn’t make it to the final list were SBI Capital Markets Ltd and Citigroup Global Markets India Private Ltd. GIC Re, the state-owned reinsurer, has also selected five merchant bankers — Citi Group Global Markets, Axis Capital, Kotak Mahindra Capital, Deusche Equities India and HSBC Securities and Capital Markets. However, other key factors of the listing like size, pricing and timing of the IPOs of both the companies are yet to be finalised. “NIA is still talking to the government to give the final shape to its IPO. It will be a fairly large issue where the proceeds will go to both government and NIA,” sources said.
The likely timing of the issue will be either around October or November. However, sources in the Ministry of Finance have clarified that there will some gap in launching the IPOs of NIA and GIC Re. The government has set a steep disinvestment target of Rs 72,500 crore in 2017-18, of which Rs 11,000 crore is expected to come from listing of PSU general insurance companies. NIA has provided cover to petrochemical, oil & energy industries, power & steel plants, aviation fleet, satellites, large projects & infrastructures, SMEs and is present in all segments of the commercial sector. With operations in 28 countries, NIA’s global business for in 2016-17 was Rs 22,000 crore. The networth of the company as on March 31, 2016 was Rs 28,895 crore (including fair value change account). For the year ended March 2016, profit before tax was Rs 906 crore and profit after tax was Rs 829 crore.
The other state owned general insurers like National Insurance, United Insurance and Oriental Insurance need to improve their financials before planning their IPOs. “GIC Re will be going for an initial public offer of equity shares with face value of Rs 5 each to the public in the domestic market,” the DIPAM said while inviting merchant bankers to bid for managing the share sale. It has a premium income of Rs 24,000 crore, net worth of about Rs 40,000 crore and total assets of around Rs 85,000 crore as of December 2016.
The Department of Investment and Public Asset Management (DIPAM) in its request for proposal (RFP) said the size of the IPO and its structure will be decided by the government or the company in consultation with selected bankers and legal advisors. Besides underwriting the IPO, the merchant bankers would advise the insurers and the government on the timing and the modalities of the IPO. They would also undertake due diligence activities and prepare the draft prospectus, among other things.
The merchant bankers would also organise both domestic and international road shows and ensure best return from the IPO to the government and the company. DIPAM has come out with guidelines for mechanism and procedure for time-bound listing of public sector units on stock exchanges under which the government has mandated launch of IPO within five-and-a-half months of a nod from the ministry concerned. In mid-January, the cabinet had approved listing of five general insurance companies — New India Assurance Company, United India Insurance, Oriental Insurance Company, National Insurance Company and General Insurance Corporation of India (GIC Re). Going by the preparedness, only GIC Re and New India Assurance are ready with their plans to offer shares while the other three need to improve their financial performance before commencing the process for getting listed, said an insurance sector official.
ICICI Prudential Life Insurance which came out with a Rs 6,000 crore IPO at a price of Rs 334 per share in September 2016 has a market capitalisation of over Rs 58,000 crore. Its share is now quoted at Rs 405.85 on the BSE. Max Financial services, the holding company of Max Life Insurance, is also listed on the exchanges.