Insurers Not Keen to Come Up with IPO

With the cabinet clearing the proposal of 49% Foreign Direct Investment (FDI) in insurance sector, the next logical step should have been the revival of Initial Public Offering (IPO) plans of insurance companies. However, insurers do not seem to be buoyant. Neither private sector insurers nor public sector insurers are keen to come up with IPO in near future.

Though insurers have welcomed the hike in FDI cap and slew of reforms announced by government, but they do not see any significant advancement to IPO timeline for the industry. Before going for IPO insurers are waiting for new business margin that has shrunk in the last years to go up and growth to come back so that they can get right valuation.

Industry experts say that insurance companies will not be looking at IPO, till FDI limit increase in insurance is approved in parliament. Cabinet may have approved hike in FDI cap but still there is lot of uncertainties on whether 49% FDI proposal will be passed by the parliament. Only after the bill is passed by the parliament, will the companies take any call on the IPO issue.

The insurance laws (amendment) bill, 2008, approved by the cabinet provides for raising of capital from markets by public sector general insurance companies and reinsurance companies, with subject to the minimum government shareholding of 51%. But state-owned general insurers do not aspire to raise capital from markets.

Last year Insurance Regulatory and Development Authority (IRDA) had come out with IPO guidelines for life insurance companies and it is expected that IRDA will come out with final IPO guidelines for general insurers in next few weeks.