Govt may lower FY22 divestment target, offer shares of three insurers
NEW DELHI: As part of its plans to step up disinvestment in the coming financial year, the government plans to bring three insurance issuances including its planned IPO for LIC as well as follow-on public offerings for New India Assurance and GIC Re as part of its disinvestment budget for 2021-22.
The government wants the next phase of disinvestment to include financial companies run by it and will set a lower disinvestment target compared to this year’s ambitious Rs 2.1 lakh crore, which looks impossible to meet.
It also plans to come up with a strong list of PSUs which are to be strategically sold off. “We will complete the sale of BPCL, Air India and Shipping Corporation within this fiscal and build up a list of PSUs which can be strategically sold off in the next few years,” said officials.
The LIC Act will be brought before Parliament in the Budget session with amendments to allow for stake sale in the open market. Market regulator Securities and Exchange Board of India (Sebi) has mandated that at least 25 per cent stake in listed companies have to be sold in the open market, this perforce forces the government to offer LIC in the market.
“We wanted to bring the LIC float this year, but given that the LIC Act has to be amended and the IPO will be a very large one, more time is needed for it to come up,” officials added.The LIC offering will be worth around Rs 70,000 crore and the market may not be able to absorb it in one go, according to officials. Hence the offering may be split into at least two tranches.
“We will come up with FPOs for NIACL and GIC, both of which are considered systemically important financial institutions, again to comply with Sebi rules. But want to bide our time for their share prices to pick up,” said officials. New India and GIC Re are already listed on stock exchanges with about 15 per cent of its stake listed.
Choppy trade
Shares of GIC Re were selling at Rs 417 a share in 2017 when it was first listed, but the price had come down to Rs 272 a share by February and to about Rs 142 after the pandemic.