Words: Rochelle D’Souza Featured image source: upload.wikimedia.org
India’s third biggest initial public offering (IPO) is open to subscription. Government run reinsurer General Insurance Corporation of India Limited (GIC Re) has opened its IPO to raise Rs 11,370 crore public money. Earlier this month, GIC Re issued a public notice in which it set a price range of 855-912 rupees per equity share. If fully subscribed at the upper end of the price band, this will be India’s third biggest IPO after Coal India and Reliance Power. This is the first time that the country’s primary market will see public offering by a reinsurer company. According to reports, the government’s move has come to meet the fiscal deficit target of 3.2 percent during the year by divesting some of its stakes in state-run companies.
As per the IPO, the government will sell 107.5 million shares, while the company will raise funds by selling 17.2 million new shares. Banks such as Citi, Axis Capital, Deutsche Bank, HSBC and Kotak are managing the GIC Re IPO. GIC Re has net worth of close to Rs 50,000 crore and total assets of Rs 100,000 crore. The weighted average earning per share (EPS) for 2016-17 is at Rs 32 per share. The estimated market valuation of the corporation, as per the market, will be around Rs 1,00,000 crore. With today’s subscription offerings, GIC could emerge as the top ten most valued public sector companies in India. Malayali business behemoth Alice G Vaidyan is currently GIC’s chairman and managing director.
Thought most brokerages have advised investors to go for it, there is a certain level of risk involved while investing in the IPO particularly when one analyses the industry in question. The reinsurance industry is highly competitive and GIC will be in direct competition with a number of worldwide reinsurance companies, many of which have greater financial resources and industry experience. Many a times, foreign currency fluctuations can also reduce net income and capital levels.
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(With inputs from PTI)