The Indian government has plans to sell 10% of GIC Re in FY 2025

The Central government of India may sell up to 10% stake in the state-run reinsurer General Insurance Corporation (GIC Re) in the current financial year, a senior official told Financial Express.

The officials commented, “GIC Re received a very good response in the roadshows held recently to apprise potential investors of the company’s unique position in the Indian reinsurance market and its strong growth potential.”

The official has further added that the government has no immediate plans to sell any more stakes in Life Insurance Corporation (LIC), but it would explore the option at appropriate times in small tranches.

The Centre owns an 85.78% stake in GIC Re and wants to reduce it to 75% by August 2024 to meet the minimum public shareholding (MPS) of 25% in the company. However, the company may get a one-year extension to meet the MPS norms.

Some of the state-run companies which met MPS norms have seen their share prices rise exponentially. GIC is the only Indian reinsurer which provides support to direct insurers in India and receives obligatory cessions on every policy by domestic general insurers.

GIC showcased its dominant position in the domestic market with a 67% share gross reinsurance premium reported for the financial year 2023 of $4.4 billion, with the remaining shares with foreign reinsurance branches (FRBs).

India’s general insurance market is estimated to grow at a compound annual growth rate of 9.9% during 2021-2026, Consequently, reinsurance premiums are expected to touch $12 billion by 2025.

GIC Re is expected to maintain market leadership on strong financials, adequate capacity and expertise with a return on equity at a solid 20.1% return on equity and net profit rose 2.9 times on year to $830 million in FY 2023.

After IPO investors are rewarded by the market, the government will initiate the sale of at least another 1.5% stake in LIC to make the stock eligible to be part of index funds to attract a larger long-term investor pool.

LIC share price touched Rs. 973.05 on 19th April 2024, up by 2.5% compared with the IPO issue price of Rs 949 on May 17th, 2022.

Since the LIC share price has been volatile after its listing in May 2022, the government recently gave a 10-year window for the insurance behemoth to the MPS norm of 25%. The government owns 96.5% of LIC.

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