India seeks bids from bankers for stake sale in state-owned insurers

Photo: Indranil Bhoumik/Mint

The Union finance ministry has sought proposals for appointing merchant bankers and selling brokers for the disinvestment of its stakes in General Insurance Corporation of India (GIC) and the New India Assurance Company Ltd (NIACL) using the stock exchange platform.

“The government is considering for disinvestment a part of its paid-up equity in GIC and NIACL out of its shareholding through “offer of sale (OFS) by promoters through stock exchanges. Proposals are invited by 1530 hours (IST) on 7 December 2018 from reputed merchant bankers either singly or as a consortium, with experience and expertise in public offerings in the capital market, to act as merchant bankers and to assist and advise government in the process,” the Department of Investment and Public Asset Management (DIPAM) said in newspaper advertisements published on Thursday.

The cabinet committee on economic affairs (CCEA) in January 2017 approved the public listing of five state-owned non-life insurance companies and reducing the government’s stakes in them to 75% from 100%.

Out of Oriental Insurance Company, National Insurance Company, NIACL, United India Insurance and national reinsurer General Insurance Corporation of India, or GIC Re, the government last year listed GIC and NIACL through initial public offerings, selling 12.5% and 11.65% of its stakes respectively in the equity market.

Stake sales in these two insurance companies fetched the government a total of ₹17,357 crore. The government is likely to sell another 10% in GIC and NIACL to meet the minimum public shareholding norm of the equity market regulator SEBI for all listed companies.

The government has so far garnered ₹15,247 crore through disinvestmentin the current fiscal year against the target of ₹80,000 crore.

With its unsuccessful bid to privatize Air India, the government may find it difficult to achieve the target unlike last year.

In 2017-18, the government overshot its disinvestment target of ₹72,500 crore by garnering ₹1 trillion, aided by completion of the acquisition of Hindustan Petroleum Corp. Ltd (HPCL) by Oil and Natural Gas Corp. Ltd (ONGC) for around ₹37,000 crore.

Since achieving the disinvestment target is key to meeting its fiscal deficit target of 3.3% of gross domestic product (GDP) in 2018-19, the government may ask public sector undertakings (PSUs) to buy back their own shares, thus transferring surplus cash to the government.

In 2017-18, the Union government carried out as many as 13 buybacks in cash-rich PSUs to meet its disinvestment target.

This article was first published on livemint.com