Three public sector insurance companies—The Oriental Insurance Co. Ltd, National Insurance Co. Ltd, and United India Insurance Co. Ltd— will be merged into a single insurance company and listed on the bourses, finance minister Arun Jaitley announced in the Union Budget on Thursday.
The merging of the three state-run insurers will lead to the creation of a mammoth organization, and will be a key part of the government’s divestment target of Rs80,000 crore set for fiscal year 2018-19.
“It is a very positive move. It is the government’s resolve that CPSEs achieve scale, heft and strengthen their balance sheets,” said Ajay Bodke, chief executive and chief portfolio manager at brokerage Prabhudas Lilladher Pvt. Ltd.
“We have seen consolidation happening in oil and gas, and the banking sector. It is just a continuation of that trend in the insurance sector,” Bodke added.
The government has initiated strategic disinvestment in 24 public sector undertakings (PSUs), including flag carrier Air India.
In 2017, the government listed two state-owned insurers—New India Assurance Company Ltd and General Insurance Corporation of India—on 13 November and 25 October, respectively. These stocks are down 17.50% and 16.67% respectively from their offer price.
To be sure, analysts had flagged the stretched valuations of these initial public offerings, and the shares slid post listing.
The Indian equity market’s largest institutional investor, Life Insurance Corporation of India (LIC), had bought 8.42% and 8.67% stake respectively in General Insurance Corp. and New India Assurance Co. during their IPOs.
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