Cabinet okays sale of 25% pie in general insurance cos

Cabinet okays sale of 25% pie in general insurance cos

 The Union Cabinet on Wednesday approved plans for 25% sale of the government’s share in each of the five state-owned general insurance companies.

The government currently holds 100% stake in the five general insurance companies, namely, New India Assurance Company, National Insurance Company, Oriental Insurance Company, United India Insurance Company and a re-insurance firm General Insurance Corp.

Briefing reporters on the Cabinet decision, Finance Minister Arun Jaitley said the government holding in these five companies will gradually fall to 75% after listing them on stock exchanges.

During the process of disinvestment, existing rules and regulations of the Securities and Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority of India (IRDAI) will be followed, Jaitley said.

In August, the IRDA had issued a discussion paper on listing of firms, proposing that all general insurance companies in existence for eight years and life insurance companies for 10 years should initiate steps to get their shares listed on stock exchanges.

Jaitley said the listing may include issue of fresh shares and offer for sale of existing shares. 

In the 2016-17 Budget, Jaitley had proposed public listing of public sector general insurance entities.

The government expects listing on the stock exchange will require companies to come out with a number of disclosures and accounting requirements of the Sebi that will act as an additional oversight mechanism. “The disclosures bring about transparency and equity in the companies’ functioning,” an official statement read.

“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,” it said.

Listing will also open the way for 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, officials said.

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