Insurance cos smile as India Inc seeks IPO, QIP cover

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Insurance cos smile as India Inc seeks IPO, QIP cover

Insurance companies have good reason to smile. As more companies rush to join the IPO and QIP bandwagons, they are also rushing to insure themselves against any possible misrepresentation or omission in their offer documents.

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Insurance companies have good reason to smile. As more companies rush to join the initial public offers (IPO) and qualified institutional placement (QIP) bandwagons, they are also rushing to insure themselves against any possible misrepresentation or omission in their offer documents.

Here is a verbatim transcript of Neha Bothra's comments on CNBC-TV18. Also watch the accompanying video. 

With the IPO and QIP party on in full swing insurance companies are also making merry. Interestingly, markets have moved up nearly 90% since last November and India Inc has embarked on a massive fund raising spree. Many companies going for QIPs or IPOs are showing interest for this particular kind of a cover - A Public Offering and Securities Insurance (POSI) cover- but what exactly is it? - When a company goes in for an IPO or a QIP it may be liable for certain claims arising later due to misdeclarations, misrepresentations, errors and omissions in the offer documents prospectus road show and even presentations.

So a POSI cover as it is normally called protects the company from these claims which may arise in the future. We understand from sources that Gujarat Pipavav has a cover limit o USD f 50 million at a premium of 0.55% to point 0.85% of the sum limit. Adani Power has a cover limit of Rs 25 crore and premium of approximately 0.6%. We understand that these are only some of the companies which have opted for this kind of a cover. There are many other companies which are showing a lot of interest for opting for this cover.

Many companies such as Lodha and Glenmark are already negotiating terms and conditions and TCS , Suzlon also have opted for such a cover in the past.