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Headline : GIC Re's Rs11,370 crore IPO to open on 11 Oct, sets a price range of Rs855-912 a share
News Date : Oct 04, 2017
Source : Agencies
Total offer of 124.7 million shares constitutes 14.2% of the post-offer paid up share capital


State-run reinsurer General Insurance Corp of India’s (GIC Re) Rs 11,370 crore ($1.7 billion) initial public offering (IPO) will hit the market during 11-13 October.

With a face value of Rs 5, GIC Re set a price range of Rs 855-912 a share for its IPO.This will be India’s third-biggest IPO after Coal India and Reliance Power that raised over Rs 15,470 crore in  2010 and  Rs 11,700 crore in 2008 respectively.

At the upper end of the price range, GIC Re IPO would raise Rs 11,370 crore ($1.7 billion). With this kind of pricing, GIC Re is valued in the range of Rs 75- 80,000 crore and priced more attractively than that of some recent  public issues in insurance space including ICICI Lombard General Insurance.

For GIC Re, the price to book is at 1.5 to 1.6 times, while for ICICI Lombard General Insurance at a pricing of Rs 661, the stock is available at price to book value of 8 times.
However, GIC Re, being a reinsurance company, is strictly not comparable with that of GIC Re which is a reinsurance company, said merchant bankers.

``Investor interest is high both from the foreign market as well as domestic market. We are in a unique space as a reinsurer and have a dominant market share. Also, we have been consistently profit-making with a global book.We have also have a strong balance sheet and vibrant enterprise risk management. We are the twelfth largest reinsurer in the world and third largest in Asia,’’ said Alice Vaidyan, chairman and managing director, GIC Re.

The Corporation enjoys 60 per cent of market share on reinsurance space within the country at present.Despite competition due to the arrival of more global reinsurers in the Indian market, GIC Re is expected to maintain its leadership going forward, said Vaidyan. 

``Foreign reinsurers always had a 50 percent market share and they were writing Indian business from outside even earlier. We don't see any impact and see room for everyone to grow,’’ explained Vaidyan.

The reinsurance market in India is worth Rs 38,800 crore and has been growing at a CAGR of 11 to 14 per cent. The healthy Indian GDP growth, rising income, low insurance penetration levels, the protection gap between economic and insured losses will drive reinsurance industry growth, observed Vaidyan.


The Indian reinsurer plans to rebalance its domestic to international business at 60:40 within a couple of years.Currently it is at 70:30.The portfolio ratio a year ago was at 55:45 a year ago.

GIC Re is making efforts to grow its profitability going forward. ``On a standalone basis, our combined ratio was within 100 percent. On domestic as well as international, it is within 100 percent for us in first quarter as well. That is the single most focus in GIC Re.’’

The reinsurer plans to utilize the net proceeds of the fresh issue towards augmenting its capital base to support its business growth.

The corporation intends to become 10th largest reinsurer of the world within a year’s time.

According to Vaidyan, the Corporation plans to acquire a syndicate at Lloyd’s during next fiscal and is looking out for a suitable  acquisition in the global reinsurance markets.

The GIC Re’s offer would constitute 14.22 per cent of post-offer paid-up equity share capital, which means dilution of 12.26 per cent stake owned by the government and the balance of 1.96 per cent by the Corporation itself.

The equity shares of GIC Re is proposed to be listed on the National Stock Exchange and BSE.

Meanwhile, net profit of the corporation was at Rs 390 crore for the April-June quarter as against Rs 704 crore a year ago period.Driven by crop reinsurance, the Corporation’s gross premium grew 189 per cent at Rs 17,195 crore for the reporting period from Rs 5,941 crore a year ago. The share of crop reinsurance alone was at Rs 9,925 crore.

Combined ratio of the corporation is currently at 99.7 per cent..




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