The government may garner Rs 10,000 crore from stake sale in the two entities.
The government's plan to sell 10 percent stake in New India Assurance and General Insurance Corporation of India (GIC Re) is likely to be completed by the end of the fourth quarter (Q4) of the financial year (FY19). Sources told Moneycontrol that the government could garner Rs 10,000 crore from the divestment of its stake.
"The stake sale process is underway. Through the offer-for-sale route, the government is looking to complete the process by the end of FY19," said an official.
A detailed valuation exercise of the two entities will be done in the next few weeks. GIC Re and New India were listed in FY18. During the initial public offering of the entities, the idea was to sell 25 percent of the government stake in three years. This means that they have time till 2020, to complete the process. GIC Re and New India were listed in October 2017 and November 2017 respectively.
In New India, the government holding is at 85.44 percent, as of December 2018. And in GIC, the government holds 85.78 percent.
New India and GIC Re are the largest general insurer and reinsurer respectively in the country. Through the stake sale, the government will unlock value out of these entities which will be used for other activities.
The government, which has set a divestment target of Rs 80,000 crore for 2018-19, has so far raised over Rs 34,000 crore. A report said that the finance ministry may consider selling part of its stake in Axis Bank and ITC, held through SUUTI, in next few months.
While initially the government wanted to finalise the process by December 2018, they were involved in selecting a consultant for the merger of the three non-life general insurers -National Insurance, Oriental Insurance and United India Insurance. Here, EY has been roped in as the consultant for the process.The idea is to merge and subsequent list the entities and the government will be able to raise capital through this initiative as well. Initial estimates suggest that this will be the largest non-life insurance company in India, valued at Rs 1.2-1.5 lakh crore.