Government has decided to reduce its stake in five state-owned general insurance companies to 75 per cent and list them on stock exchanges. The move will help insurers raise funds from capital markets as also to improve corporate governance.
“It could be either by fresh equity or Offer for Sale. Bothoptions are available. We can expand the shareholding so that the government share comes down to 75 per cent,” Finance Minister Arun Jaitley told reporters after the Cabinet meeting here today.
The Cabinet Committee on Economic Affairs, headed by Prime Minister Narendra Modi, gave ‘in principle’ nod for listing five government-owned general insurance companies -- New India Assurance Company, United India Insurance, Oriental Insurance Company, National Insurance Company and General Insurance Corporation of India (GIC).
The general insurance industry 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.”
The Government shareholding in these companies will be reduced from 100 per cent to 75 per cent in one or more tranches over a period of time, Jaitley said.
“All procedural formalities are over. Now the companies will have to comply with the listing requirements with stock exchanges and Sebi,” he said, when asked whether they will be listed in the current financial year ending March 31.
During the process of disinvestment, he said, the existing rules and regulations of Securities and Exchange Board of India (Sebi) and Insurance Regulatory and Development Authority of India (IRDAI) will be followed.
“Whatever are the regulations, they have to comply with that,” he said, when asked if the companies will initially divest 10 per cent stake as per the regulatory requirement.
He said listing on the stock exchange necessitates compliance with a number of disclosures and accounting requirements of Sebi, which acts as an additional oversight mechanism.
The disclosures bring about transparency and equity in functioning of companies, he added.
listing is expected to lead to improved corporate governance and risk management practices leading to improved efficiency, he said, adding that a greater focus on growth and earnings can also be expected.
listing will open the way for the companies to raise resources from the capital market to meet their fund requirements to expand their businesses, instead of being dependent on the government for capital infusion.