Anil Ambani-controlled Reliance Group on Monday filed a draft proposal with the Securities and Exchange Board of India to list its general insurance arm, Reliance General Insurance Co Ltd, through an initial public offering.
The public issue is scheduled for early 2018, two persons familiar with the development said.
The offer comprises a fresh issue of nearly 16.76 million shares besides an offer for sale of nearly 50.31 million shares, according to the draft red herring prospectus filed with SEBI. The public issue will result in 25% stake dilution on a post-issue basis, making the firm compliant with SEBI’s norms for the minimum public float.
The IPO size is estimated at Rs 1,500-1,600 crore ($230-245 million), said one of the persons cited above.
VCCircle was the first to report on company’s plans to go for an IPO and that it had shortlisted a set of merchant banks.
However, the second person cited above said that the company didn’t hire those firms as they couldn’t accept the mandate due to a conflict of interest with the planned offerings by state-owned firms New India Assurance Co. Ltd and General Insurance Corporation of India.
Reliance General will join a growing list of insurance companies – both general and life – that are either listed or planning to go public. These firms include SBI Life Insurance Co Ltd, New India Assurance, General Insurance and ICICI Lombard General Insurance Co Ltd.
GIC Re is looking to raise up to $1.7 billion through a share sale beginning Wednesday.
Reliance General will also join listed group firms Reliance Communications, Reliance Infrastructure and Reliance Capital on the bourses. The group is also looking to list the mutual fund business Reliance Nippon Life Asset Management through an IPO next year. It demerged its home finance arm into a standalone entity and listed it on stock markets late last month.
Here’s a snapshot of Reliance General’s proposed IPO:
The IPO size is estimated at Rs 1,500-1,600 crore ($230-245 million). It will value the firm at Rs 6,400 crore ($975 million). The public issue will result in 25% stake dilution on a post-issue basis.
Use of proceeds:
The company will use proceeds from the fresh issue of shares to augment the solvency margin and increase the solvency ratio, besides meeting its future capital requirement to meet the anticipated growth of its business.
The proceeds from the secondary sale will go to promoters.
Motilal Oswal Financial Services, Credit Suisse Securities (India), Edelweiss Financial Services, UBS Securities India, Haitong Securities India and IDBI Capital are the merchant bankers managing the IPO.
Luthra & Luthra Law Offices is the legal counsel representing Reliance General and its promoter Reliance Capital.
Khaitan & Co and Sidley Austin LPP are Indian and international legal counsels to the merchant bankers.
Incorporated in August 2000, Reliance General Insurance is majority-owned and operated by Reliance Capital Ltd, the group’s diversified financial services company.
It offers general insurance products, including motor insurance for cars, two-wheelers and commercial vehicles, health insurance, travel insurance and home insurance.
The country’s fourth-largest private-sector general insurer also offers insurance to companies for fire and other hazards, group mediclaim insurance, and education insurance to individuals and corporate clients.
The company reported a net profit of Rs 44.25 crore for the six months ended June 2017 on gross direct premium income of Rs 1,201.49 crore.
For the fiscal year 2016-17, its net profit was Rs 128.72 crore on gross direct premium income of Rs 3,938.35 crore.
The company has seen a compound annual growth of 18.3% in gross direct premium income for five years since 2012-13. Its net profit has risen at a compound rate of 28.13% from Rs 37.28 crore in 2012-13.
Its insolvency ratio was 1.7 times as on June 2017 compared with the regulatory requirement of 1.5 times.