Exclusive: Government intends to unload 10% of GIC and New India Assurance each by August 24 using the OFS mechanism

 Exclusive: Government intends to unload 10% of GIC and New India Assurance each by August 24 using the OFS mechanism

Action required to comply with listing standards; if investors are not amused, further expansion of the minimum public ownership requirements may be pursued.

Before the deadline to achieve the minimum public ownership criterion, a senior government official said that the government aims to sell at least 10 percent each of the two listed public sector insurance businesses, General Insurance Corporation of India (GIC) and New India Assurance Company.

85.78 percent of GIC and 85.44 percent of New India Assurance Company Ltd. are owned by the government.

The finance ministry is considering making an offer for sale (OFS) in GIC and New India Assurance, which now have more than 85% of their shares held by the government. Before August 2024, the administration hopes to implement an OFS in each, the official informed Moneycontrol.

Up to August 2024, both were excluded from the minimum public ownership requirement by the Securities and Exchange Board of India (SEBI). A publicly traded firm must have at least 25% of its shares owned by the public in order to maintain its listing, per SEBI requirements.

The ministry of finance has already sent invitations to potential investors, but the response has been lackluster. The government may think about requesting a further extension of the deadline from the market regulator if it is unable to lower its ownership to at least 75%.

However, the problem lies in the lack of investor interest in the publicly traded insurance businesses at the moment. The economic affairs division of the finance ministry would request an exception if the government fails, according to the previously mentioned person.

An OFS is a tool used by promoters of listed companies to offer shares to the general public directly.

Another senior government official had said previously that these two non-life public insurance businesses are financially strong and do not need capital injection in current fiscal year. He said, "One of the insurance companies will actually give the government a dividend in FY24."

In FY23, GIC declared profit after tax (PAT) of Rs 6,312.50 crore, whereas in FY22, PAT was Rs 2,005.74 crore.

For the first quarter of FY24, New India Assurance reported a tripling of net profit, at Rs 260 crore. In the same time last year, it reported a net profit of Rs 118 crore. In comparison to the first quarter of the prior fiscal year, its overall revenue increased to Rs 9,274 crore from Rs 8,143 crore.

With its main office located in Mumbai, New India Assurance operates in 28 nations.