Cabinet approves ECGC IPO, Rs 4,400 crore capital infusion: Goyal

Out of the total amount, Rs 500 crore will be infused in current fiscal, another Rs 500 crore will be infused in FY23 and remaining amount will be infused as and when required

The Union Cabinet, headed by Prime Minister Narendra Modi on Wednesday approved infusion of Rs 4,400 crore into state-owned credit insurance provider ECGC Ltd over a period of five years, starting FY22. It also approved listing of the company on the domestic bourses, which is likely to happen in the next fiscal.

Out of the total amount, Rs 500 crore will be infused in the current fiscal. Another Rs 500 crore will be infused in FY23, commerce and industry minister Piyush Goyal said in a media briefing after the Cabinet meeting. The remaining amount is concerned, it will be infused as and when required.

“As far as the quantum of listing is concerned....all of these will be decided by the alternative mechanism in the due course,” Goyal said.

An official statement said that the proposed listing of ECGC will unlock the ‘true value of the company’, ‘promote people's ownership’ by encouraging public participation in the equity holding of the company.

Listing on domestic bourses will result in more transparency as well as accountability, and enable the company to mobilize fresh capital from the market, either through the same IPO or subsequently through a follow-on public offer (FPO). This will also result in increasing its maximum liabilities to Rs 2.03 trillion from Rs 1 trillion by 2025-26.

“The approved infusion along with efforts made to suitably synchronize with the listing process of ECGC through the Initial Public Offering will increase the underwriting capacity of ECGC to support more exports,” an official statement said.

ECGC was set up more than five decades ago to promote exports by providing credit insurance services to exporters against non-payment risks by the overseas buyers due to commercial and political reasons. Currently, it is the largest player in the export credit insurance market in India.

ECGC provides insurance covers to banks, thereby encouraging banks to lend to small exporters that have been hit by the pandemic.  “When small exporters export, they want it to have insurance cover as well. If for some reason the payment does not come, in such a situation, the government company ECGC will provide the facility of insurance for the payment,” Goyal said.

The announcement comes at a time when India is looking at achieving a $400 billion export target in the current fiscal, which will also aid economic recovery. Goyal said that as of 21 September, India has exported goods worth $185 and is expected to reach $195 mark during the first six months of the current fiscal. While the government is optimistic of meeting the $400 billion target, owing to challenges such as high  shipping rates and container shortage it may be difficult to exceed the target, he added.

“The approved amount will be infused in instalments thereby  increasing  the  capacity to underwrite risks up to Rs 88,000 crore and this will enable ECGC to issue covers that can support additional exports of Rs 5.28 lakh crore over the five-year period in line with the existing pattern,” the statement said.

The Cabinet also approved continuation of the National Export Insurance Account (NEIA) scheme and infusion of Rs 1,650 crore grant-in-aid over a period of five years, from FY22 to FY26.

NEIA Trust set up to promote project exports from India that are of strategic and national importance. The capital infusion in NEIA Trust will help the Indian project exporters to tap the huge potential of project exports in the focus market.

“Corpus contribution of Rs 1,650 crore will enhance the underwriting capacity of the Trust and will enable NEIA to support project exports worth Rs 33,000 crore at full capacity utilization that in turn will translate into an estimated output of domestically manufactured goods to the tune of Rs 25,000 crore approximately,” the commerce and industry ministry said in a separate statement.

The fund infusion in NEIA will help create 2.6 lakh new jobs, including around 12,000 in the formal sector.