The general insurance industry and analysts today welcomed the government decision to take the five state-owned companies public, saying it will help unleash the value potential of the sector apart from forcing the private players to follow suit.
"We welcome the government decision. We are awaiting further directions such as the timeline, valuation etc to go ahead," National Insurance Company chairman and managing director Sanath Kumar told PTI reacting to the government decision to list five state-run general insurers.
National Insurance, along with the other four- New India Assurance Company, United India Insurance, Oriental Insurance Company, and General Insurance Corporation of India, will be listed following the move.
New India Assurance chairman G Srinivasan said, "The proposed listing will help the company improve brand image, corporate governance and bring in more transparency. It will also help us raise the much-needed capital".
Stating that they will start the work on listing shortly, he said, "We will now start the process and it may take six to eight months' from now. Our board will meet shortly to take a call on the listing process." Earlier in the day, the Cabinet gave its nod for listing the five state-run general insurance companies, under which it will reduce its holding in them 75 percent.
"It could be either by fresh equity or offer for sale.
Both options are available. We can expand the shareholding, so that the government share comes down to 75 percent," Finance Minister Arun Jaitley told reporters after the Cabinet meeting in the Capital.
With the listing, government holding in these firms will come down from 100 percent to 75 percent in one or more tranches over a period of time, he said, adding all procedural formalities are over. Now, the companies will have to comply with the listing requirements with stock exchanges and Sebi.
Shashwat Sharma, head of insurance at KPMG said the move will help the market discover the value of general insurers since there are no listed players now.
"The move is also expected to pave the way for listing of private players over the next couple of years apart from enabling the PSUs raise capital from market and improve solvency requirements," he added.
Bajaj Allianz General Insurance's Tapan Singhel said it would bring in more accountability to the market.
Sanath Kumar admitted that National's solvency margin is below the requirement of 1.5 now, but expressed the hope to improve within the stipulated timeframe. "We will be able to improve the solvency margin to the required level within six- seven months before the listing," he added.
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