Cabinet approves dilution of govt stake in PSU general insurance companies
18 Jan 2017
The union cabinet today approved listing of state-owned general insurance companies to help these companies raise resources from the market as well as help meet the government's divestment targets.
The cabinet committee of economic affairs (CCEA) on Wednesday approved the listing of the five state-owned general insurance companies thereby reducing government's stake in these companies to 75 per cent from 100 per cent.
The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi gave its 'in principle' approval for listing the following five government owned general insurance companies in the stock exchanges.
Oriental Insurance Company, National Insurance Company, New India Insurance, United India Insurance and national reinsurer General Insurance Corporation of India, or GIC Re, are the five companies that will list on stock exchanges.
The decision is in line with an announcement made by union finance minister Arun Jaitley in last year's budget.
''Public shareholding in government-owned companies is a means of ensuring higher levels of transparency and accountability. To promote this objective, the general insurance companies owned by the government will be listed in the stock exchanges,'' Jaitley had said.
The shareholding of these public sector general insurance companies (PSGICs) will be divested from 100 per cent to 75 per cent in one or more tranches over a period of time. During the process of disinvestment, existing rules and regulations of Securities and Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority of India (IRDAI) will be followed.
Listing on the stock exchange necessitates compliance with a number of disclosures and accounting requirements of Sebi, which acts as an additional oversight mechanism. The disclosures bring about transparency and equity in the companies functioning.
Listing is expected to lead to improved corporate governance and risk management practices leading to improved efficiency. A greater focus on growth and earnings can also be expected.
Listing will open the way for the companies to raise resources from the capital market to meet their fund requirements to expand their businesses, instead of being dependent on the government for capital infusion.
The finance minister in his budget speech for 2016-17 had announced that public shareholding in government-owned companies is a means of ensuring higher levels of transparency and accountability; and to promote this objective, the general insurance companies owned by the government will be listed on the stock exchanges.
