Oriental Insurance, National Insurance, New India Insurance, United India Insurance among firms that will list on stock exchanges
New Delhi: The cabinet committee on economic affairs (CCEA) on Wednesday approved the public listing of five state-owned non-life insurance companies and reducing the government’s stake in them to 75% from 100%.
Oriental Insurance Company, National Insurance Company, New India Assurance, United India Insurance and national reinsurer General Insurance Corporation of India, or GIC Re, are the five companies that will be listed on stock exchanges.
The dilution of the government’s stake will take place either through issue of fresh equity or an offer for sale or through a combination of both, finance minister Arun Jaitley said at a press conference.
The government’s stake will be brought down to 75% in tranches as per regulations of the Securities and Exchange Board of India (Sebi) and the Insurance Regulatory and Development Authority of India (Irda).
The insurance companies and the department of financial services will commence the process soon, Jaitley added.
“This process will start now. We will try to complete the requirements required by Sebi and stock exchanges as soon as possible," the finance minister said when asked if the insurers will be listed in the current financial year.
Listing will help these companies raise resources from the market and reduce their dependence on government funds. It will also improve corporate governance and risk management practices at these companies, said a government statement.
It is also expected to help the government meet its disinvestment targets although it is not clear if the share sales will go ahead before the financial year ends on 31 March.
The decision is in line with an announcement Jaitley made in last year’s budget on the listing of these companies.
Oriental Insurance, New India Assurance, National Insurance and United India Insurance together command over half the market share in general insurance. Although all the four were profitable in 2015-16, two made losses in the first half of 2016-17. Oriental Insurance and United India Insurance reported a loss of Rs382 crore and Rs428 crore, respectively in the first half of 2016-17 that ended in September, while National Insurance and New India Assurance reported a profit of Rs128 crore and Rs478 crore, respectively.
Khushroo Panthaky, director, Grant Thornton Advisory Pvt. Ltd, said the regulators’ top priority would be to ensure that policyholders’ interests are protected and the shares are sold at a fair valuation.
“The insurance companies in the private sector and the public sector have been in the business for a while now and it is time that not only the incumbent shareholders get the opportunity to liquidate a portion of their shareholding at a profit and make up for the loss of dividends in its initial years of existence but also give the opportunity to the companies by infusing more capital into it so that they continue to maintain their capital adequacies and also have more funds available at a very low cost to meet their future expansion plans," he wrote in a note.
The CCEA also gave its approval to an “alternative mechanism, to decide on the quantum of disinvestment in a particular central public sector undertaking (CPSE) on a case-by-case basis subject to government retaining 51% equity and management control".
It also cleared a package for supporting Micro and Small Enterprises (MSEs). Prime Minister Narendra Modi had announced the expansion of the corpus of credit guarantee trust fund for Micro and Small Enterprises (CGTMSE) from Rs2,500 crore to Rs7,500 crore in a speech on 31 December. This would increase coverage of the loans under the credit guarantee scheme from Rs1 crore to Rs2 crore.
A proposal for establishing a Rs200-crore Indian Agricultural Research Institute (lARI) in Jharkhand was also approved. It will come up on 1,000 acres provided by the state government at Gauria Karma village in Barhi block of Hazaribag.
Ahead of the visit of the crown prince of Abu Dhabi, Sheikh Mohamed bin Zayed Al Nahyan, who will be the chief guest at the Republic Day parade this year, the cabinet cleared the signing of five memoranda of understanding (MoUs) between India and United Arab Emirates (UAE).
The MoUs cover cooperation in small and medium enterprises and innovation, agriculture and allied sectors, maritime transport and in the road, transport and the highways sector. The cabinet also approved an MoU on the ‘Mutual Recognition of Certificates of Competency’ which will pave the way for recognition of maritime education and training courses and certificates of competency for seafarers awarded by each other’s government.
The proposal for India’s membership to the International Vaccine Institute (IVI) governing council was also approved by the cabinet. This will involve payment of annual contribution of $500,000 to the institute based in Seoul, South Korea.
The cabinet also approved an MoU between India and Russia to promote exchange of ideas, values and culture among youth through various exchange programs.
The cabinet also cleared a proposal to repeal 105 obsolete laws, reviving the government’s drive towards legal reforms. Over the last two years, the government has repealed hundreds of laws which are outdated and have fulfilled the purpose of the law or put newer legislation in place.
The government, in 2014, set up a two-member panel to identify obsolete laws. The Law Commission also submitted four reports on its findings regarding outdated pieces of legislation.
The Repealing and Amending Bill, 2017, aimed at removing 105 old and redundant laws, is likely to be introduced in the budget session of Parliament.