Indian Government Plans 10% Stake Sale in GIC Re by August 2024

The Indian government is gearing up to sell up to a 10% stake in the state-run General Insurance Corporation (GIC Re) in the financial year 2024/25 or by August 2024. This decision comes on the heels of successful investor roadshows conducted by GIC Re in New York, Singapore, Hong Kong, Dubai, and London, where the company showcased its dominant 67% share in India's growing reinsurance market.

During these roadshows, GIC Re received positive feedback from investors, prompting the government to consider selling the stake in tranches, depending on the share value. The sale of the 10% stake in GIC Re is expected to garner around 57 billion rupees ($683 million) based on the current share price.

The government currently owns 85.78% of GIC Re and needs to reduce its stake to 75% by August 2023 to meet the minimum public shareholding (MPS) of 25%. However, the government may seek a one-year extension to comply with the MPS norms. Depending on market appetite, the government could sell around 10% stake in one or a couple of tranches in FY25 or by August 2024.

Why this matters: The stake sale in GIC Re is part of the Indian government's efforts to raise funds through disinvestment in state-owned companies. The successful investor roadshows and the positive feedback received indicate a strong interest in GIC Re's shares, which could help the government meet its disinvestment targets and boost the country's fiscal position.

In addition to the GIC Re stake sale, the government is also open to a minority stake sale in Life Insurance Corporation of India (LIC) in the same financial year, after assessing investor interest. The government had previously sold a 3.5% stake in LIC's IPO in 2022 and plans to offload another 1.5% stake, which can help the government garner around Rs 92 billion. However, the government has no immediate plans to sell any more stake in LIC, but may explore the option "at appropriate times in small tranches".

Key Takeaways

• Govt plans to sell up to 10% stake in GIC Re in FY25 or by Aug 2024.
• GIC Re received positive investor feedback, indicating strong market interest.
• Govt needs to reduce its 85.78% stake in GIC Re to 75% by Aug 2023.
• Govt open to minority stake sale in LIC in FY24-25 after assessing interest.
• Stake sales aim to raise funds through disinvestment and boost fiscal position.