New Delhi: The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved a plan to reduce government stake in five state-run general insurance companies to 75 percent from 100 percent by listing them on the stock exchange.
Finance minister Arun Jaitley had announced in last year's budget the government would list the general insurance companies to improve transparency and accountability.
The five firms that will be listed include four public sector general insurance companies — New India Assurance Company Ltd, National Insurance Company Ltd, Oriental Insurance Co Ltd, United India Insurance Co Ltd and one re-insurance firm General Insurance Corporation of India.
The four general insurance companies have a market share of 47.63 percent by the end of November 2016. The public shareholding of these Public Sector General Insurance Companies (PSGICs) will be divested to 75 percent in one or more tranches over a period of time.
"As and when these general insurance companies go for an IPO and get listed, apart from helping them meet their capital requirements from sources other than the government, it also brings greater transparency and enhances governance standards.
As these companies become accountable to public shareholders, their performance parameters will be subject to greater scrutiny, which in turn may force them to become more efficient and competitive," said Sai Venkateshwaran, Partner and Head (Accounting Advisory Services) KPMG India. He said that the approval has come at a time when the primary markets have shown great interest in IPOs from financial services sectors over the past few months.
During the process of disinvestment, existing rules and regulations of Sebi and Irdai will be followed. Listing on the stock exchange necessitates compliance with a number of disclosures and accounting requirements of Sebi, which acts as an additional oversight mechanism. The disclosures bring about transparency and equity in the companies functioning....