A clutch of five state-run insurers will soon be vying for investor attention but the success of the government’s stake sale plan will depend on how smartly the process is managed. The Union Cabinet gave its nod on Wednesday to reduce the government’s stake by 25 percent in fully-owned national reinsurer, General Insurance Corporation of India (GIC Re), along with New India Insurance Co, Oriental Insurance Co, National Insurance Co and United India Assurance Co.
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The reduction of Centre’s holding through public offer will no doubt be beneficial for the general insurers since it would ease the government’s grip on them somewhat and provide flexibility for them to raise further resources from the capital market. It would be understandable if in the days to come to the five companies vied with each other to emerge as the first to hit the market. However, the euphoria of being allowed to go public should be tempered with an assessment of ground realities. The insurers should be mindful that the market might not have enough appetite for five mega issue of an identical kind within a short span. This, especially at a time when the equity market has been seeing a lull with indices moving in a small range.
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