General Insurance Corporation (GIC Re) is likely to be the first PSU insurer to tap the capital market as the Finance Ministry has started scouting for merchant bankers to manage its IPO.
Two months after the Union Cabinet gave a go ahead to the listing of five general insurance companies, the Department of Investment and Public Asset Management (DIPAM) has set the ball rolling for listing of GIC Re.
The government holds 100 per cent stake in GIC Re, which provides reinsurance support to 54 general and life insurance companies, both public and private, in the Indian market.
The authorised and paid-up share capital of the reinsurance company was Rs 1,000 crore and Rs 430 crore, respectively, as on March 31, 2016. “GIC Re will be going for an initial public offer (IPO) 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.
The state-owned reinsurer would appoint up to eight merchant bankers for managing the IPO. Merchant bankers have to submit bids by April 18.
The share sale could hit the market only in the next fiscal.
In mid-January, the Cabinet had approved listing of general insurance companies — New India Assurance Company, United India Insurance, Oriental Insurance Company, National Insurance Company and General Insurance Corporation of India (GIC Re). It had approved dilution of up to 25 per cent equity stake in the five companies.
DIPAM in its request for proposal (RFP) said the size of the IPO and its structure shall 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 GIC Re 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 bankers would also organise both domestic and international road shows and ensure best return from the IPO to the government and the company.
The government has set a steep disinvestment target of Rs 72,500 crore for the next fiscal, of which Rs 11,000 crore is expected to come from listing of PSU general insurance companies.
DIPAM has come out with guidelines for mechanism and procedure for time-bound listing of CPSEs on stock exchanges under which the government has mandated launch of initial public offer (IPO) within five-and-a-half months of a nod from the ministry concerned.