GIC Re's Rs 11,500 cr IPO to hit markets next week

Third-largest offering in the domestic market

General Insurance Corporation of India (GIC Re), a government-owned general reinsurer, will launch its Rs 11,500 crore initial public offering (IPO) next week, said people with the direct knowledge of the development. The offering will be biggest since Coal India’s Rs 15,200-crore IPO in October 2010. 

It will also be the third-largest IPO in the history of domestic market. GIC Re’s comes close on heels of two successful big-ticket IPOs from the insurance sector. Last month, IPOs of SBI Life Insurance Company and ICICI Lombard had raised Rs 8,400 crore and Rs 5,700 crore respectively. Both the offerings had seen healthy demand from institutional investors.

GIC Re had filed its offer document with market regulator Securities and Exchange Board of India (Sebi) in August. According to the draft red herring prospectus (drhp), GIC Re’s IPO comprises of fresh equity issuance of 17.2 million shares and an offer for sale of 107.5 million shares by the government. The government’s stake sale could be worth Rs 9,920 crore, while the fresh issuance by the insurer could be worth Rs 1,580 crore. The IPO could lead to dilution of about 14.2 per cent stake.

GIC Re’s IPO is part of the government’s 2017-18 disinvestment programme. So far this fiscal, the centre has raised close to Rs 15,000 crore as against targeted Rs 72,500 crore. The success of GIC Re's offering will give a boost to the disinvestment kitty.

The centre is also looking to list four other non-life insurance companies which include New India Assurance, National Insurance, Oriental Insurance, and United India Insurance. Investment banking sources say New India Assurance is next in line to hit the market.

GIC Re had posted net profit of Rs 3,140.6 crore in FY17, up 11.2 per cent over FY16. Gross premium earned by the company in FY17 had risen to 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 fresh issue proceeds will be used by GIC Re to augment its capital base and for other corporate purposes.

Citigroup, Axis Capital, Deutsche, HSBC and Kotak Mahindra Capital are the investment banks handling the GIC Re IPO.