The government plans to divest a 6.8% stake in the General Insurance Corporation of India (GIC Re) through an offer-for-sale, pricing the shares at Rs 395 each—a 6% discount compared to Tuesday’s closing price. This sale is expected to generate approximately Rs 4,700 crore, contributing to the government’s disinvestment goal for the year.
With limited opportunities for major strategic sales, aside from IDBI Bank, the government is likely to rely on smaller share sales to meet its Rs 50,000 crore disinvestment target for the current fiscal year. The share sale will take place over two days: non-retail investors can bid starting Wednesday, followed by retail investors and GIC Re employees on Thursday.
Currently, the government holds around 85.8% of GIC Re, India’s sole reinsurance company that assists insurers in managing risk. This divestment aligns with the government’s strategy to adhere to regulatory guidelines and reduce its stake in public sector enterprises. GIC Re’s initial public offering (IPO) in 2017 was valued at Rs 11,176 crore, while in comparison, Coal India raised Rs 22,400 crore through an offer-for-sale in 2015. GIC Re’s market capitalization stands at Rs 73,904 crore, and at the floor price, its market value is Rs 69,298 crore. The government intends to offer nearly 6 crore shares, equivalent to 3.4% of GIC Re’s total capital, with an option to sell up to 11.95 crore shares if the oversubscription option is fully utilized.
Of the total shares on offer, 50,000 are reserved for GIC Re employees. Retail investors can place bids at the floor price or opt for a ‘cut-off price,’ which will be determined based on the previous day’s sales to non-retail investors.
At least 25% of the shares are reserved for mutual funds and insurance companies, while 10% are allocated to retail investors. The offer may be canceled if there are insufficient bids above the floor price or if settlement issues arise. The sale will be available on both the BSE and NSE.
In Q1 FY25, GIC Re reported a 42% increase in net profit, reaching Rs 1,036 crore, up from Rs 731 crore the previous year. Gross premium income surged by 39% to Rs 12,406 crore from Rs 8,918 crore, though investment income fell by 21.5% to Rs 2,007 crore. The incurred claims ratio improved to 89.8% from 95.1%, and the combined ratio decreased to 109.6% from 118.5%.
