MUMBAI: State-owned general insurance companies can now get listed on the stock exchanges with the recent promulgation of the ordinance on the Insurance Bill.
“There is an enablement by the government for dilution of stake. The government can now take a call on divestment,” said G Srinivasan, chairman, New India Assurance.According to G Srinivasan there is no pressure to raise fresh capital as the company already has a solvency margin of 2.6 times the statutory requirement. This means that present levels of capital are enough to meet next few years of growth requirement.
Adding that listing was a topic that was discussed with the government in the past, Srinivasan acknowledged that public issue brought in benefits other than capital mobilization. “Being listed does bring some recognition and improves brand value,” said G Srinivasan.Besides hiking foreign investment limits the Insurance Bill contains a clause which amends Section 10 of the General Insurance Business Nationalisation Act of 1972 allowing government shareholding in General Insurance Corporation, New India Assurance, National Insurance, Oriental Insurance and United India Insurance to fall up to 51%.”The honour of possible partial privatization is thus confined to General Insurance Corporation and four public sector companies and not Life Insurance Corporation,” KK Srinivasan, former member, IRDA. He added that if the public sector companies are listed FIIs can also invest in them.
Industry experts say that listing will bring in benefits far beyond enabling fund raising for the government and insurance companies. The chase for topline growth among the four public sector companies by giving up on profitability is expected to come down. It would enable companies to reward employees with performance incentives through stock options. According to G Srinivasan, all the state-owned general insurance companies are already following all the requirements of a listed company. “We are bringing our results every quarter. All the necessary disclosures are there and in most respects we are at par with a listed company,” he said. He added that should the company decide to go for a listing there would not be much preparation required.
Compared to the PSU insurers the private sector life companies face a much bigger challenge in getting listed. “The companies considering IPOs will need to work with SEBI (Securities and Exchange Board of India) and the IRDA to get the necessary approvals. The disclosure requirements for IPOs as outlined in the Actuarial Practice Standard 10 (APS10) issued by the Institute of Actuaries of India are also somewhat onerous, with companies needing to start and plan work well in advance of any planned listing date,” said management consultancy firm Milliman.
Curated from Insurers can now get listed on bourses – The Times of India