Cabinet approves listing ECGC on bourses

The government will inject Rs 4,400 crore in Export Credit Guarantee Corporation (ECGC) over a period of five years beginning 2021-22.

The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved listing Export Credit Guarantee Corporation (ECGC), an unlisted CPSE, through the initial public offer (IPO) on the stock exchange.

ECGC is a wholly-owned CPSE of Government of India set up with the objective of improving the competitiveness of the exports by providing credit risk insurance and related services for exports. The company intends to increase its maximum liabilities (ML) to Rs 2.03 lakh crore from Rs 1 lakh crore by 2025-26.

"The proposed listing of ECGC would unlock the true value of the company, promote 'people's ownership' by encouraging public participation in the equity holding of the company and also promote Corporate Governance through transparency and greater accountability," the CCEA said in a note.

Listing may enable ECGC to mobilize fresh capital from the market either through the same IPO or subsequently through a Follow-on Public Offer (FPO) and thereby help in increasing the maximum liability cover for it. The disinvestment proceeds will be used for financing of social sector schemes, CCEA added.

Further, the government has approved capital infusion of Rs 4,400 crore to ECGC over a period of five years (from FY 2021-2022 to FY 2025-2026). The approved infusion along with efforts made to suitably synchronize with the listing process of ECGC through the IPO will increase the underwriting capacity of ECGC to support more exports.

ECGC was established by the Government of India under Companies Act in 1957 to promote exports by providing credit insurance services to exporters against non- payment risks by the overseas buyers due to commercial and political reasons. It also provides insurance covers to banks against risks in export credit lending to the exporter borrowers. ECGC endeavours to support the Indian export industry with its experience, expertise and underlying commitment to progress and advance of India's exports.

Capital infusion in ECGC will enable it to expand its coverage to export oriented industry particularly labour-intensive sectors. The approved amount will be infused in installments 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.

ECGC is a market leader with around 85% market share in export credit insurance market in India. Export supported by ECGC was Rs 6.02 lakh crore in 2020-21, which is around 28% of India's merchandise exports. ECGC insures around 50% of total export credit disbursement by banks, covering 22 banks (12 public sector banks and 10 private sector banks). It has settled claims more than Rs.7,500 crore in the last decade. ECGC has shown continuous surplus and made dividend payments to the Govt. for last 20 years, CCEA noted.

Powered by Capital Market - Live News