|Move is aimed at arriving at a valuation before going for IPOs
Finance minister Arun Jaitley may have cleared the way for public listing of state owned general insurers, but National Insurance and New India Assurance may first go for strategic stake sale to arrive at a valuation before their initial public offerings.
K Sanath Kumar, chairman and managing director at National Insurance Company , said the firm is ready for listing and is awaiting formal instructions from the government.“There are three ways of doing it -first is strategic stake sale, second is listing to evaluate valuation and third is to raise additional capital,“ he said.
A senior executive of New India Assurance said, “We have not decided on the quantum but we want to explore the idea of strategic stake sale.“
The official, who requested not to be named, said the company is waiting for directions from the government on how to go ahead with listing. “We would like to be the open many more branches and for which we need capital.“
The finance minister had in his budget speech last month proposed to list New India Assurance, National Insurance, United India and Oriental Insurance and reinsurance company General Insurance Corporation.
The Insurance Laws (Amendment) Act 2015 enables the government to dilute equity stakes in PSU insurance companies by up to 51% to raise capital, keeping in view the need for expansion of the business.
Disinvestment is expected to bring in underwriting discipline in the general insurance sector. Today, companies only generate investment profit. The public sector insurers’ losses increased by 22.57% to Rs 6,592 crore in 2014-15 from Rs 5,379 crore in 2013-14.
Source:-The Economic Times (Mumbai)