GIC Re IPO to Launch on 11 October

State-owned General Insurance Corp. of India Ltd (GIC Re) on Wednesday said it will launch its Rs11,372 crore ($1.7 billion) initial public offering (IPO) on 11 October. It is the largest IPO in India in seven years.

The insurance company has set a price band of Rs855-912 per share for the IPO, which values it at Rs75,000-80,000 crore. The offer will close on 13 October.

GIC Re’s IPO is second only to state-owned Coal India Ltd’s Rs15,200 crore initial share sale in 2010, which remains the largest public offering till date by an Indian entity.

GIC Re is the largest reinsurance company in India and accounted for about 60% of the premiums ceded by Indian insurers to reinsurers during fiscal 2017, according to Crisil Research.

The company offers reinsurance services in key businesses such as fire (property), marine, motor, engineering, agriculture, aviation, health, liability, credit and financial liability, and life insurance.

GIC Re also plans to acquire a reinsurance company that is a member of Lloyd’s of London.

“Syndicate business is on the cards. If any right target for acquisition comes up on the way, we will pick it up,” said Alice G. Vaidyan, chairman and managing director, GIC Re.

The IPO of GIC Re will see a total stake dilution of 14.22%.

The IPO includes a fresh issue of Rs1,568.6 crore. Proceeds from the fresh issue will be used for augmenting the capital base of the reinsurer to support the growth of its business, to maintain current solvency levels and for general corporate purposes.

The government, in an offer for sale, plans to sell a total of 107.5 million shares, which at the upper end of the price band will fetch Rs9,804 crore.

GIC’s initial share sale is part of the Union government’s divestment plan, under which the department of investment and public asset management (DIPAM) plans to sell government stakes in several central public sector enterprises through various routes such as IPOs, offers for sale and strategic sales.

State-owned firms that have been cleared for IPOs include three defence ministry enterprises Bharat Dynamics Ltd, Garden Reach Shipbuilders and Engineers Ltd and Mazagon Dock Shipbuilders Ltd MSTC Ltd, and Mishra Dhatu Nigam Ltd, controlled by the steel ministry, and North Eastern Electric Power Corp. Ltd, which is under the power ministry, Hindustan Aeronautics Ltd and New India Assurance Co.

Through divestments in central public sector enterprises, the government aims to raise Rs72,500 crore in 2017-18. In 2016-17, disinvestments raised Rs46,246.58 crore, data from the DIPAM website shows.

According to a Thomson Reuters report, Indian companies raised a total of $17.2 billion in the first nine months of 2017, through equity and equity linked securities. The highest since $24.2 billion was raised in the first nine months of 2007.

According to Prithvi Haldea, chairman of primary market tracker Prime Database, the number of issues have been few but the issue sizes have been high.

“Most of the companies are seasoned companies, many of them with private equity/venture capital investments. Pricing has been reasonable. There has been lot of divestments by the government in the recent past, which will continue...There are three factors for the issue to be attractive sector, pricing and track record of company, which has been the case so far,” he added.