Centre may speed up stake dilution in GIC Re, New India Assurance

The Union finance ministry is planning to dilute at least half of the required stake in general insurance companies such as New India Assurance Company and General Insurance Corporation of India (GIC Re) in 2025-26 (FY26) to ensure compliance with the minimum public shareholding (MPS) norms mandated by the Securities and Exchange Board of India (Sebi), according to a senior government official.

 

As of now, the government holds 85.44 per cent in New India Assurance and 82.4 per cent in GIC Re. Sebi mandates all listed companies, including public sector insurers, to maintain a minimum of 25 per cent public shareholding under Rule 19A of the Securities Contracts (Regulation) Rules, 1957, and Regulation 38 of the Sebi (Listing Obligations and Disclosure Requirements) Regulations. This means the government has to dilute a 10.44 per cent stake in New India Assurance and 7.4 per cent in GIC Re.

 

“We are committed to meeting the MPS norms within the stipulated time frame. To achieve this, we plan to dilute stakes in a phased manner,” said the official. “For instance, for GIC Re, the target is to dilute nearly 3.5 per cent, while for New India Assurance, we aim to offload about 5 per cent by the end of FY26.”

 

The official said that in coordination with the insurance companies, the government will soon launch fresh roadshows to engage with potential investors. “We are also expecting to receive some extension from the regulator in the case of GIC Re and New India Assurance, whose current deadline stands at August 2026,” the official added. “Since the stake dilution will be carried out in tranches, we may need to pause between issues, depending on market appetite and conditions.” 

 

An email sent to the finance ministry remained unanswered until the time of going to press.

 

The finance ministry had floated a request for proposal in February to dilute its equity in select public-sector banks and listed public financial institutions by inviting bids from merchant bankers and legal advisors. The Department of Investment and Public Asset Management Secretary Arunish Chawla told Business Standard in an interview last month that about a dozen merchant bankers have been approved for these financial transactions.

 

Chawla had said that the government plans to divest a 6.5 per cent stake in Life Insurance Corporation (LIC) of India in tranches over the next 24 months. The Sebi has permitted LIC to raise its public stake to 10 per cent by May 16, 2027. The insurance behemoth was listed in May 2022 with a 3.5 per cent dilution of the government’s stake.

 

“This year, you will see that we will follow a strategy of regular offers for sale in small tranches. We are officially giving forward guidance that small investors should look out for it,” Chawla said.

 

While most central public sector enterprises have now met the MPS norm, Chawla said that a few sectors, such as defence, railways, and financials, are still left out. “We are actively pursuing their disinvestment. Hopefully, within the next one year, we would like all of them to achieve MPS norms. That is critical because it helps create sufficient stock and float in the market. The pricing decision is better, and the market discipline on behalf of the enterprise is also improved,” he added.