The Union Ministry of Finance plans to divest a 6.78% stake in General Insurance Corporation of India (GIC Re) through an offer-for-sale (OFS) to raise approximately Rs 4,700 crore. This will be the first stake sale since GIC Re’s listing in 2017. The sale will commence on Wednesday for non-retail investors, with retail investors and GIC employees able to bid on Thursday.
The floor price is anticipated to be around Rs 395 per share, which is about 6% below the current market price of Rs 420.8. The government, which currently holds an 85.78% stake in GIC Re, is following a strategy similar to the one used during LIC’s IPO, aiming to increase public shareholding.
Details of the Sale
Stake and Pricing: The government will offer 3.39% of its equity in GIC Re, with an additional 3.39% as a green shoe option. The floor price is set at approximately Rs 395 per share.
Current Ownership: The government owns 85.78% of GIC Re. The move aligns with previous strategies, such as the LIC IPO, to support inclusion in index funds.
Future Plans: GIC Re Chairman Ramaswamy Narayanan indicated that the government might divest around 10% of its stake after the general elections, though no specific timeframe has been confirmed.
Regulatory Requirements: GIC Re must increase its public shareholding to 25%, up from the current 14%. The OFS aims to address this requirement without needing additional capital.
Budgetary Implications
The government has not set a separate disinvestment target for FY24. The FY25 Union Budget has revised the miscellaneous capital receipts target, including disinvestment, to Rs 50,000 crore from Rs 30,000 crore for FY24.
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