Insurance firms may have to wait longer to list

The Union government has decided not to make any change in the listing rules for insurance companies till a parliamentary panel on the subject has completed its job.

The existing rules under the insurance laws prescribe a 10-year minimum period before insurance companies can list their shares. This could have been changed by executive order and there was an indication given last year by the government that it would halve the waiting period to five years.

A little later, it went ahead and introduced a bill amending the present insurance laws which, among other things, sought to do away with the entire provision on prescribing a minimum wait. That bill was referred for examination to a standing committee of Parliament.

Now, however, the thinking is to just wait till the committee examining the Bill completes its job. There will be no early change.

This decision to wait and not to move ahead with the change to listing after five years will affect some companies which were preparing for a listing, in anticipation of a change by executive order in the rules. Reliance Life Insurance, for instance, which would complete five years of operation this year, was planning an Initial Public Offering (IPO).

These companies still have the option to raise capital by offering stake to other investors through the private placement route.

And, meanwhile, the IPO guidelines for insurance companies being finalised by the Insurance Regulatory & Development Authority and the Securities & Exchange Board of India would be based on the present regulations. Meaning, they’d prescribe mandatory listing after only 10 years of operation. “IPO guidelines will not be interrupted because of delay in announcing the change in the listing timeframe,” a source added.

The present guidelines prescribe that Indian promoters of insurance joint ventures have to shed a part of their stake through the IPO. However, with higher foreign investment cap, the holding structures might need to be reviewed. The government and the regulator were examining the prospects of allowing the Indian and the foreign promoters to shed their stake proportionately in the IPO.

With no specified minimum operations period for listing, companies would have the option to list anytime they want.