The public listing of five non-life general insurance companies will most likely be spaced out. New India Assurance and General Insurance Corporation of India (GIC Re) will probably be hitting the capital markets in FY18 while others will be listed in subsequent years.
Last month, the Cabinet gave its nod to list five non-life general insurance companies as part of government's move to reduce its stake to 75 percent from 100 percent in the insurers.
Oriental Insurance Company, National Insurance Company, New India Assurance, United India Insurance and national reinsurer General Insurance Corporation of India, or GIC Re are the five insurers who will be listing.
“The aim is to complete the process of listing of at least two players by March 2018. Solvency and underwriting performance are the top criteria,” said a senior ministry official.
The reasoning behind this more staggered listing process is to give investors enough time between each initial offer.
The chairman of a public sector general insurance company on road to listing explained that it will not be wise to get all the PSU non-life insurers listed at the same time. “We do not want investor appetite to wane with multiple listings in the same year. Hence, the government may decide on only one or two listings for FY18,” he added.
A final note on the process and structure of the listing of the five entities will be circulated by the government among the stakeholders in the next few weeks.
Among other reasons for the staggered process is also the fact that the solvency ratio of two of these insurers namely National Insurance (126 percent) and Oriental Insurance (114 percent) are below the prescribed minimum limit of 150 percent. A solvency ratio is a measure of the risk an insurer faces of claims that it cannot absorb.
Further, the ministry also wants all the four general insurers to improve their underwriting positions and have a better pricing mechanism to minimize losses, so that a better picture can be presented at the time of listing of the entities.
All these PSU insurers will also have to deal with minor hiccups like convincing their employee unions and take them into confidence before the IPO drafts are filed with the respective regulators.
ICICI Prudential Life Insurance is the first insurance company to get listed on the stock exchanges. It listed on September 29, 2016. While it is trading at a healthy price currently, it had listed below its issue price of Rs 334 a share on both Bombay Stock Exchange and National Stock Exchange even after the public issue was oversubcribed by 10.5 times.
After the Cabinet nod, the insurers have begun discussions to get a banker on-board for the Initial Public Offering (IPO). The timeline of the IPO will also be given by the government and once appointed, the bankers will take the deal forward.
After bankers begin the process of valuation and take a decision on how much divestment of stake will be done, the respective boards of the insurers will meet to give their approval to the structure. Following this, the insurance companies will need to take an approval from regulatory bodies like Insurance Regulatory and Development Authority of India (IRDAI) and Securities and Exchange Board of India (Sebi).
Post this, a draft red herring prospectus (DRHP) will be filed with Sebi for approval. Once this final approval is secured, roadshows will begin to gauge investor appetite for the IPO.
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