India's Finance Ministry to divest 6.78% of GIC Re

India’s Finance Ministry to divest 6.78% of GIC Re | Insurance Business New Zealand

Reinsurance

India’s Finance Ministry to divest 6.78% of GIC Re

Non-retail investors get first chance to buy since 2017 as the OFS opens

Reinsurance

By
Kenneth Araullo

The Union Ministry of Finance is set to sell a 6.78% stake in the state-owned General Insurance Corporation of India (GIC Re) for approximately ₹4,700 crore.

This marks the first time since the reinsurer’s 2017 offer-for-sale (OFS) listing that non-retail investors will have the opportunity to purchase shares, with sales opening on Wednesday.

Retail investors and GIC Re employees are expected to place bids starting Thursday, a report said. According to the Department of Investment and Public Asset Management (DIPAM), the government will divest 3.39% of its shares, with an option to offer an additional 3.39% through a “green shoe option.”

The OFS floor price is anticipated to be set around ₹395 per share, reflecting a 6% discount from the current market price of ₹420.8, where GIC Re’s stock closed on Tuesday, a decrease of 1.4%. The government currently holds 85.78% of GIC Re.

The move follows a strategy similar to the one employed during the Life Insurance Corporation’s (LIC) initial public offering (IPO), where the government divested 3.5% of its holdings, with an option to sell another 1.5% to facilitate the insurer’s inclusion in index funds.

Earlier this year, GIC Re chairman and managing director Ramaswamy Narayanan (pictured above) indicated that the government was likely to initiate the divestment process for roughly a 10% stake in the reinsurer after the general elections, although no precise timeline was established. Narayanan suggested that the decision was largely in the hands of the government.

In another interview, Narayanan also reiterated the need for GIC Re to reach the minimum public shareholding threshold of 25%, up from its current level of around 14%. He noted that the government-led OFS would address this requirement, as the company does not require additional funds and maintains a strong solvency position.

The government, beginning in fiscal year 2024, will no longer set specific disinvestment targets. For FY25, the Union Budget has set a goal of ₹50,000 crore in capital receipts from disinvestment, an increase from the revised estimate of ₹30,000 crore for FY24.

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