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State-run reinsurance firm GIC Re files for IPO
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State-owned reinsurance firm General Insurance Corporation of India (GIC Re) on Monday filed its draft red herring prospectus with the Securities and Exchange Board of India for a public listing.

The offer comprises a fresh issue of 17.2 million shares by the company, besides a secondary market sale of 107.5 million shares by the government.

The public offer will result in 14.22% stake dilution on a post-offer basis for the government, which currently owns 100% in the company.

The issue size is estimated at Rs 6,500-7,000 crore ($1.02-1.1 billion), and it is expected to hit the market in October-November, two people privy to the development told VCCircle.

A third person familiar with the development, however, pegged the issue size at Rs 9,000-10,000 crore ($1.41-1.5 billion).

GIC Re, the 12th largest reinsurance firm globally by gross premium written, will get three years from the date of listing to meet the minimum public shareholding norm of at least 25% public float.

It joins a growing list of Indian insurance firms—general and life—that have either firmed up plans for a public offering or already gone public. Other names include National India Assurance (NIA), HDFC Standard Life Insurance Co, ICICI Lombard General Insurance Co and Reliance General Insurance Co.

ICICI Prudential Life Insurance became the first life insurer in India to go public last year.

The government’s stake dilution in GIC Re is part of the record disinvestment target for the current financial year to contain the fiscal deficit at 3.2% of the gross domestic product.

Finance minister Arun Jaitley has proposed to raise Rs 72,500 crore through capital receipts comprising minority sales, strategic disinvestments and listing of state-owned insurance companies. The government has also pitched for listing of shares of railway PSEs, such as the Indian Railway Catering and Tourism Corporation (IRCTC), Indian Railway Finance Corporation (IRFC), and Ircon International.

Here’s a snapshot of GIC Re’s proposed IPO.

Issue

The offering will see a fresh issue of 17.2 million shares, besides a secondary sale of 107.5 million shares by the government. The IPO will result in a 14.22% stake dilution for the government on a post-offer basis.

People aware of the development peg the issue size at Rs 6,500-10,000 crore ($1.02-1.5 billion), and it is expected to hit the market in October-November.

Use of proceeds

The company will use the proceeds from the issue to augment its capital base, besides general corporate purposes. The rest will go to the exchequer as part of disinvestment collections for the current fiscal.

Bankers

Citigroup Global Markets India, Axis Capital, Deutsche Equities India, HSBC Securities and Capital Markets (India), and Kotak Mahindra Capital Company are financial advisers for the IPO.

Lawyers

GIC Re has hired Cyril Amarchand Mangaldas as the Indian counsel, and Clyde & Co as the international counsel. Khaitan & Co and Herbert Smith Freehills LLP are the Indian and international legal advisers to the merchant bankers managing the IPO.

Company

India’s largest reinsurance company by domestic gross written premium, GIC Re accounted for about 60% of the total premium ceded by Indian insurers to reinsurers last fiscal.

It offers reinsurance across many key business lines, including fire (property), marine, motor, engineering, agriculture, aviation/space, health, liability, credit, and financial and life insurance.

GIC is also an international reinsurer and had underwritten businesses from 162 countries as on March 2017.

Its gross consolidated premium for the financial year 2017 stood at Rs 33,740.79 crore. The agriculture sector accounted for 28.91% of the gross premium collection in India and overseas, followed by fire (24.26%) and motor (19.64%).

The company is headquartered in Mumbai and has overseas branch offices in London, Dubai and Kuala Lumpur; a representative office in Moscow; a subsidiary in the UK that is a member of insurance market Lloyd’s of London; and a subsidiary in South Africa.

Financials

GIC Re posted a consolidated net profit of Rs 3,140.62 crore for the financial year 2017 on gross premiums of Rs 33,740.79 crore. Its gross premiums stood at Rs 18,534.24 crore in 2016 and Rs 15,270.15 crore in 2015.

Profit stood at Rs 2,823.41 crore in financial year 2016 and Rs 2,890.97 crore in financial year 2015.

As of March 2017, the company’s net worth (including fair value change account) stood at Rs 49,550.84 crore while the total value of assets held amounted to Rs 97,079.44 crore.

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