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Government Plans to Sell 10% stake in GIC and 1.5% stake in LIC


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The Indian government is planning to sell up to a 10% stake in the state-run General Insurance Corporation (GIC Re) during the current financial year. This decision comes after GIC Re received positive feedback during recent roadshows held to inform potential investors about the company’s unique position in the Indian reinsurance market and its strong growth potential.

General Insurance Corporation of India Limited, abbreviated as GIC Re, is an Indian public sector reinsurance company which has its registered office and headquarters in Mumbai. It was incorporated on 22 November 1972 under Companies Act, 1956.

The government official also mentioned that there are no immediate plans to sell any more stake in Life Insurance Corporation (LIC). However, the government may explore this option in small tranches at appropriate times.

Investor Outreach Programs and Stake Value

GIC Re conducted investor outreach programs in various cities, including New York, Singapore, Hong Kong, Dubai, and London, between February 19 and March 1. The current market value of a 10% stake in GIC Re is approximately Rs 5,700 crore. The company’s share price closed at Rs 324.95 on Friday, representing a 1.87% decrease from the previous closing.

Minimum Public Shareholding Requirement

Currently, the government owns 85.78% of GIC Re and needs to reduce its stake to 75% by August of this year to meet the minimum public shareholding (MPS) requirement of 25% in the company. However, there is an expectation that GIC Re may receive a one-year extension to meet the MPS norms.

Future Stake Sales and Market Performance

Depending on market conditions and investor appetite, the government may sell around 10% stake in GIC Re in one or multiple tranches in the next financial year (FY25) or by August of the following year.

It is worth noting that state-run companies that have met the MPS norms in the past have seen significant increases in their share prices. For example, after Hindustan Aeronautics (HAL) met the MPS norm in March of the previous year, its share price doubled.

GIC Re’s Position in the Market

GIC Re is the only Indian reinsurer that provides support to direct insurers in India and receives obligatory cessions on every policy by domestic general insurers. The company holds a dominant position in the domestic market, with a 67% share of the gross reinsurance premium of $4.4 billion in FY23. The remaining shares are held by foreign reinsurance branches (FRBs).

Growth Potential and Financial Performance

The general insurance market in India is expected to grow at a compound annual growth rate (CAGR) of 9.9% during the period of 2021-2026. Reinsurance premiums in India are projected to reach $12 billion by 2025.

GIC Re is expected to maintain its market leadership due to its strong financials, adequate capacity, and expertise. In FY23, the company achieved a return on equity (RoE) of 20.1% and its net profit increased 2.9 times year-on-year to $830 million.

Stake Sale in Life Insurance Corporation (LIC)

The government plans to sell at least another 1.5% stake in LIC after the market rewards IPO investors. This additional stake sale aims to make LIC stock eligible to be part of index funds and attract a larger long-term investor pool. Currently, the government owns 96.5% of LIC.

LIC’s share price reached Rs 973.05 on Friday, representing a 2.5% increase compared to the IPO issue price of Rs 949 on May 17, 2022. To comply with the minimum public shareholding (MPS) norm of 25%, the government recently provided LIC with a 10-year window due to the volatility in its share price after listing in May 2022.

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