GIC's IPO is a part of the Union government's disinvestment plan, under which the Department of Investment and Public Asset Management (DIPAM) plans to sell government's stakes in several central public sector enterprises through various routes such as IPOs and offers for sale.
The Rs 11,372 crore IPO of General Insurance Corporation, the biggest pubic offer in last seven years after Coal India's, is a mix of fresh issue and an offer for sale by Government of India and the corporation itself. The price band of the IPO has been fixed between Rs 855 to 912 per share. "The retail receives the shares at a discount of Rs 45 per share compared to institutional bidders", says Rahul Shah, Vice President-Equity Advisory Group, Motilal Oswal Securities. Post this issue promoter holding in the company will drop to almost 86 per cent.
GIC Re, the 12th largest reinsurance firm globally by gross premium written, joins a growing list of Indian insurance firms that have either firmed up plans for a public offering or already gone public. The company provides reinsurance across key business lines including fire, marine, motor, engineering, agriculture, aviation, health, liability, credit and finance. The state-run reinsurer is seeking to raise as much Rs 11,372 crore ($1.7 billion), at a market valuation of Rs 79,976.37 crore (12.3 billion). On consolidated basis, the company's gross premium have grown at a CAGR of 48.65 per cent FY1517.
Through the OFS component of the issue, the government plans to sell 107.5 million shares of GIC, which at the upper end of the price band will fetch around Rs 9,804 crore. AUM Capital also has a "subscribe" rating on the issue from a long-term perspective.