India’s Union Ministry of Finance is set to sell a 6.78% stake in the state-owned General Insurance Corporation of India (GIC Re), valued at approximately ₹4,700 crore. This marks the first divestment in GIC Re since its 2017 Offer-for-Sale (OFS) listing.
Non-Retail Investors First in Line
The divestment process opens for non-retail investors on Wednesday, with retail investors and GIC Re employees expected to place bids starting on Thursday. The government, which currently holds 85.78% of GIC Re, will divest 3.39% of its shares, with an option to sell another 3.39% through a green shoe option.
Pricing and Market Context
The OFS floor price is expected to be set around ₹395 per share, a 6% discount from GIC Re’s current market price of ₹420.8, where the stock closed on Tuesday, after a 1.4% decrease. The government’s goal is to raise funds from the divestment while maintaining a solid market standing for GIC Re shares.
Government Strategy and Market Impact
This move aligns with the government’s broader divestment strategy, similar to the one employed during the Life Insurance Corporation’s (LIC) IPO, where it divested 3.5% of its holdings. Earlier this year, Ramaswamy Narayanan, GIC Re’s chairman and managing director, suggested that the government would likely divest around 10% of its stake post-general elections.
The government-led OFS aims to help GIC Re reach the minimum public shareholding threshold of 25%, up from its current 14%, while the company remains financially stable and solvent, without the need for additional funds.
No Specific Disinvestment Targets
For FY25, the Union Budget has set a target of ₹50,000 crore from disinvestment, up from the revised estimate of ₹30,000 crore for FY24. However, beginning in FY24, the government will no longer set specific disinvestment targets, signaling flexibility in its approach.
