The Finance Ministry is planning a share sale in two recently listed insurance companies — General Insurance Corporation of India (GIC) and New India Assurance (NIA) which has remained headless for the last four months.
The Department of Investment and Public Asset Management (DIPAM) has invited expression of interest (EoI) from merchant bankers and brokers for managing the offer for sale (OFS) of GIC and New India Assurance.
After G Srinivasan retired and the Chairman and Managing Director on July 31, 2018, MoF had put two directors H Rokde and C Narumbunathan as joint in-charge of NIA for three months but that got over at the end of October. The company is now headless and has been losing market share with its stock price constantly sliding. Its performance as reflected in the recently announced half yearly performance has nosedived in terms of profit and underwriting losses. “This is not the time to disinvest further as the company is going downhill without having a regular CMD,” according to industry observers.
Market regulator Securities and Exchange Board of India (SEBI) had mandated a minimum 25 per cent public float for all listed companies. This stipulation was extended to state-owned firms, which were initially given three years to meet the norm. The government currently which holds around 18 per cent stake in both the companies will need to divest another 10 per cent each in both the companies.
State-owned reinsurer GIC was listed on the bourses in October last year, while New India Assurance made its stock market debut in November last year.
According to ministry sources, the renewal of the term of joint in-charge of two directors for another three months can only be given by the PMO and the ministry has already sent the file to the PMO for the appointment. MoF had also conducted interviews of 10 senior officials from the PSU general insurance industry for three CMD posts vacant in NIA, United India Insurance and National Insurance. In September, it had named Tajinder Mukjerjee and Girish Radhakrishna as the CMD of National Insurance Company and UII respectively superseding many senior officials but did not fill up the post for the NIA.
“Bypassing senior officials who have more than two years is a matter of serious concern in this kind of PSUs where experience matters. It will lead to demoralisation and can damage to the organisation where motivation plays a key role in achieving the results,” said an industry source.
For some time, the MoF was toying with an idea of having private sector professionals like in the case of Bank of Baroda and Canara Bank as the CMD of NIA. But there has been a change of mind again and sources say that the MoF has started the process to fill up the vacancy from the rest of candidates who were interviewed in May. H Rokde is the senior most candidate, having more than two years of residual service.
Meanwhile, merchant bankers, who can bid singly or as a consortium, can apply for assisting the government in the stake sale process by December 7, 2018, said the EoI floated by DIPAM.
General insurer New India Assurance had raised Rs 9600 crore in the initial public offer (IPO) and had priced its shares at Rs 770-800. On Thursday, shares of New India Assurance were trading at Rs 202, down 0.93 per cent over the last close on the BSE.
Even at the time of IPO, LIC had bailed it out and had invested Rs 8000 crore alone. Realising that the IPO pricing was high, NIA had announced a 1:1 bonus while announcing its 2017-18 results. So far in the current financial year, the government has raised over Rs 15200 crore billion through PSU stake sale. The budgeted disinvestment target for the financial year is Rs 80,000 crore.