Govt may take offer-for-sale route to reduce stake in GIC Re

The likelihood of a credit rating upgrade by AM Best may act as a tailwind [View in browser]( [See all newsletters]( 19 August 2024 Govt may take offer-for-sale route to reduce stake in GIC Re [ Ramaswamy N, GIC Re, Chairman & Managing Director ] GIC Re, India’s largest re-insurer, has prepped itself for a possible offer-for-sale (OFS) by the Government, with the likelihood of a credit rating upgrade by AM Best seen acting as a tailwind. Currently, the Government has 85.78 per cent stake in the company. For a company to be listed and continue to be listed, it must have a minimum public shareholding of 25 per cent. - Also read: [RBI deputy chief moots risk-based premium for deposit insurance]( In a reply to a question on the possibility of the Government diluting its stake in GIC Re, Chairman & Managing Director Ramaswamy N, said: “ We are ready, but it’s not our call. There are two ways of doing it. We can issue more equity so that the Government’s share comes down. But, currently, we don’t need capital. From a solvency perspective, we are in a very good position. So we will not be issuing equity.” “What will happen is the government will bring down its stake possibly via OFS route....As a company, we are ready for the process.” In fact, GIC Re has conducted multiple road shows. In October 2023, it held a domestic road show, engaging with investors, analysts and other stakeholders, showcasing its growth story, profitability track record and diversified business. The solvency ratio, which is a measure of capital adequacy, of the corporation rose to 3.36 per cent as of June-end 2024 from 2.88 per cent as of June-end 2023. Insurance regulator IRDAI has set a minimum solvency ratio of 1.50 for insurers. Ramaswamy expects 15-16 per cent growth in gross premium in FY25. Last year, GIC Re’s gross premium was at ₹37,182 crore. “This year, hopefully, we will be close to about ₹42,000-43,000 crore (in gross premium collection). That is a substantial growth for us. We are confident of achieving it,” he said. Rating upgrade possibility Referring to the need for a good credit rating for writing international business, the GIC Re chief said: “This year, we are hoping to be back to “A-” credit rating from “BBB”. Our profitability and combined ratio are good. “Last year, they (AM Best, world’s largest credit rating agency specialising in the insurance industry) gave us a double push – the outlook on the rating improved from “BBB+ with negative outlook” to “BBB+ with positive outlook”. We did not go to stable, we came directly to positive. Now, we are only one notch below “A-”. The corporation, which got listed on the exchanges on October 25, 2017 via an initial public offer aggregating ₹11,176 crore, has shared its financial performance data with the credit rating agency for a possible rating upgrade. Once the company’s rating is upgraded, it expects to start growing its international book from January 1, 2025. You Might Also Like [FM Sitharaman to take stock of PSBs’ deposit mobilisation, cybersecurity levers on Aug 19]( [Money & Banking]( [FM Sitharaman to take stock of PSBs’ deposit mobilisation, cybersecurity levers on Aug 19]( [Two major export promotion schemes likely to get extension]( [Economy]( [Two major export promotion schemes likely to get extension]( [Viksit Bharat 2047 Action Plan: Govt wants to supply coal on-demand to consumers]( [Economy]( [Viksit Bharat 2047 Action Plan: Govt wants to supply coal on-demand to consumers]( [JSW MG Motor India eyes 50% of sales from EVs in FY25; to launch MG Windsor EV in Sept]( [Companies]( [JSW MG Motor India eyes 50% of sales from EVs in FY25; to launch MG Windsor EV in Sept]( Stay informed Subscribe to businessline to stay up-to-date with in-depth business news from India [arrow]( Copyright @ 2024, THG PUBLISHING PVT LTD. If you are facing any trouble in viewing this newsletter, please try [here]( Manage your newsletter subscription preferences [here]( If you do not wish to receive such emails go [here](