EY has been selected as the consultant for the process and the government wants to complete the basics of the deal before the 2019 general elections
The merger of the three state-owned general insurance companies -National Insurance, Oriental Insurance and United India Insurance - has now become a race against time.
Even as EY has been chosen as the consultant for the process, sources told Moneycontrol that the government wants to complete the basics of the process before the 2019 general elections.
"The process is underway with the consultant finally being selected. The valuation process of the entities will begin post this. The idea is to have all the approvals in place before the country gets into the election mode," said an official.
The merger has been a pet project of the BJP government. It was announced by Finance Minister Arun Jaitley in his February 2018 Budget speech. The merged entity will subsequently be listed on the stock exchanges.
The idea to merge the three insurers was to create a stronger and larger insurance company that was sustainable in the long run. The other two state-owned entities, New India Assurance and General Insurance Corporation of India are already listed on the exchanges.
Delay in appointment of consultant
While a consultant for the process was to be appointed by May 2018, the process was delayed. Timely appointments of chairmen and managing directors not being made at some of the public sector insurers also added to the delay.
The unions have also expressed concerns about the merger of the three entities, saying this would lead to retrenchment of staff at the mid and junior levels.
Initial estimates suggest that this will be the largest non-life insurance company in India, valued at Rs 1.2-1.5 lakh crore.
Completion of the merger
While the actual merger will be completed only by the third quarter of FY20, the government wants the three insurers to complete quickly complete the design process so that it helps them get approvals on time.
As at the end of FY18, the three general insurers put together had more than 200 insurance products with a total premium of Rs 45,126 crore and a market share of around 35 percent.The total employee strength of the three companies put together is around 42,000, spread over 5,700 offices. It is estimated that with the merger, there could be a 20-30 percent reduction in the employee count through the use of Voluntary Retirement Scheme (VRS) and other mechanisms.The Great Diwali Discount!
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