April 18, 2021

Govt set to divest 10% in GIC Re, New India Assurance

(This story initially appeared in on Oct 24, 2020)

Mumbai: Authorities is about to supply 10% shares within the nation’s largest non-life insurance coverage firm New India Assurance by means of a proposal on the market to the general public. The Centre may do an identical dilution within the Common Insurance coverage Company (GIC Re). Nevertheless, the timing shouldn’t be determined.

The federal government had divested near 15% stakes in each New India and GIC in 2017. The disinvestment of GIC Re resulted in a mop-up of Rs 11,370 crore and New India’s IPO raised Rs 9,600 crore. Each the businesses are at present buying and selling at huge reductions to their difficulty worth.

One of many causes for not going public was that the shares are thought-about to be undervalued as not solely are their costs at a 20% low cost to e-book worth, but in addition that New India has legacy investments in equities and actual property that aren’t mirrored within the e-book worth.

In addition to bold pricing within the IPO, another excuse for the reductions is the comparatively decrease stage of liquidity within the shares. Giant chunks of the shares are held by public sector establishments.

A proposal on the market of shares would have a threefold benefit of complying with laws, enhancing liquidity within the shares and serving to authorities increase revenues. GIC Re has a market cap of Rs 21,333 crore, whereas New India’s share worth values the corporate at Rs 17,000 crore. A 10% dilution would give the federal government near Rs 4,000 crore.

All listed corporations are required to have a minimum of 25% of their holding with the general public. In Might this 12 months, Sebi had relaxed the 25% minimal public shareholding norms for listed corporations within the wake of the Covid outbreak. The regulator requested inventory exchanges to not take any penal motion in opposition to corporations that have been to adjust to the minimal shareholding rule between March 1 and August 31. Subsequently, in August, the federal government notified modifications within the Securities Contract (Regulation) Guidelines giving listed corporations three years to adjust to the minimal shareholding guidelines.