NSE IPO windfall may boost PSU insurers, though solvency challenges remain

State-owned insurers stand to unlock significant value from NSE share sales and revaluation gains, but experts say the proceeds are unlikely to bridge their large capital shortfalls

The proposed sale of shares by state-owned general insurers in the ₹30,000-crore initial public offering (IPO) of the National Stock Exchange (NSE) is set to unlock substantial gains and strengthen their balance sheets. However, industry experts said the windfall is unlikely to materially address the deep solvency challenges facing financially stressed public-sector insurers.

 

According to Vivek Iyer, partner and financial services risk leader at Grant Thornton Bharat, the three state-owned general insurers together require ₹15,200 crore-17,000 crore of capital to achieve the regulatory solvency ratio of 150 per cent by March 2026, assuming full regulatory forbearance on the fair value change account. Without such relief, the requirement could rise to ₹33,000 crore-34,000 crore.

 

“For the stressed entities, this does not address the solvency problem. It is a good cash injection and a source of one-time money. But their capital requirements are far higher than what these proceeds will provide and will require fresh capital infusion, consolidation, or sustained underwriting profitability improvements,” Iyer said.

 

The solvency position of the insurers remains severely stressed. United India Insurance reported a solvency ratio of negative 136 per cent at the end of 2025-26 (FY26), compared with negative 65 per cent a year earlier. National Insurance’s solvency ratio deteriorated to negative 111 per cent from negative 67 per cent, while Oriental Insurance’s solvency ratio declined to negative 163 per cent from negative 103 per cent.

 

Experts said the larger significance of the IPO lies in the value unlocked through the listing of NSE, rather than the cash generated through the offer for sale.

 

“The real significance of the NSE IPO is not the amount of cash generated through offer for sale (OFS), but the unlocking of value from holdings that are currently carried at a lower price. Once listed, these shares can potentially be recognised at market value, leading to a substantial increase in insurers’ asset bases and net worth. For financially stressed public-sector insurers, this revaluation alone could materially improve solvency, even without selling the shares,” said a senior insurance expert.

 

NSE had earlier this week filed its draft red herring prospectus (DRHP) for an IPO comprising a complete OFS, under which existing shareholders will offload up to 148.9 million equity shares, representing around 6 per cent of the exchange’s equity capital. The issue is expected to become one of India’s largest listings, surpassing the ₹28,000 crore raised by Hyundai Motor India in 2024.

 

Among the insurers, National Insurance Company and United India Insurance will each sell close to 6 million shares. For National Insurance, this represents 17.05 per cent of its 35.2 million-share holding, leaving it with 29.2 million shares, or about 1.18 per cent of NSE’s equity after the sale. United India Insurance’s sale amounts to nearly 30.9 per cent of its 19.39 million-share holding, reducing its stake from 0.78 per cent to around 0.54 per cent.

 

Oriental Insurance Company plans to sell up to 4.96 million shares, equivalent to 14.1 per cent of its 35.2 million-share holding, retaining about 30.24 million shares and a 1.22 per cent stake in the exchange after the IPO. New India Assurance, which owns 35.2 million shares or 1.42 per cent of NSE, will hold nearly 1 per cent post-IPO.

 

According to the DRHP, New India Assurance, National Insurance and Oriental Insurance acquired their NSE shares at a cost of just ₹0.32 apiece, while United India Insurance acquired its holding at ₹0.50 per share.

 

Based on prevailing valuations in the unlisted market, National Insurance and United India Insurance could each realise around ₹1,200 crore from the share sale. Oriental Insurance could garner nearly ₹1,000 crore, while New India Assurance’s residual stake is estimated to be worth around ₹2,100 crore at current market prices.

 

“For entities that do not have a solvency issue, it is a great source of non-recurring gains. It boosts net worth and provides mark-to-market gains, which directly strengthen the balance sheet. For investors who are not stressed, it is a good return,” Iyer added.

 

The government infused a cumulative ₹17,450 crore into the three insurers between FY20 and FY22 to improve their financial position and solvency levels. Of this, National Insurance received ₹9,275 crore, Oriental Insurance ₹4,420 crore, and United India Insurance ₹3,755 crore.