GIC Re files for IPO; might raise Rs 6,000 crore

General Insurance Corporation of India (GIC Re), the government-owned general reinsurer, has filed a draft red herring prospectus with the Securities and Exchange Board of India (Sebi) to list its shares through an initial public offering (IPO).

Bankers said this could raise more than $1 billion or about Rs 6,380 crore, as part of the government’s plans to list five non-life insurers in which it holds stakes.

The IPO will be of 124.7 million shares, with a face value of Rs 5. The offer comprises a fresh issue of 17.2 million equity shares and an offer for sale of 107.5 million equity shares, by the promoters of the company. 

The offer would constitute 14.22 per cent of the company’s post-offer paid-up equity share capital. GIC has already received an “in-principle” approval from the stock exchanges.

Axis Capital, Deutsche Bank, Kotak Investment Banking, HSBC and Citi have been appointed as the merchant bankers for the IPO by GIC.

It is the first government-owned non-life insurance company to file a prospectus. The other four government-owned non-life insurance companies are New India Assurance, National Insurance, Oriental Insurance, and United India Insurance.

GIC Re posted a profit after tax of Rs 3,140.6 crore in FY17, up 11.2 per cent from Rs 2,823.41 crore in FY16. Gross premium earned by the company in FY17 rose by 82 per cent to Rs 33,740.8 crore from Rs 18,534 crore in FY16. The net worth of the company as of March 2017 was Rs 49,550.8 crore from Rs 40,870.3 crore in the year-ago period.

The combined ratio, which indicates a non-life insurer’s total outflow on its net earned premium, stood at 100.2 in FY17; in FY16, it was 107. The solvency ratio, which indicates an insurance company’s financial capacity to meet its short-term and long-term liabilities, was 2.41. 

The Insurance Regulatory and Development Authority-approved standard solvency ratio is 1.5.

The investment income of the company from Indian investment assets on a restated standalone basis in FY17 was Rs 4,515.6 crore; in FY 16, it was Rs 4,175 crore. It has grown at a compound annual growth rate of about 4 per cent from the FY15 to FY17.

GIC Re was the sole reinsurer in the Indian insurance market until the market opened up to foreign reinsurance players in 2016.