GIC Re sets Rs 855-912 IPO price band, may scoop up Rs 11,370 crore

Mumbai: State-run General Insurance Corporation of India (GIC Re), which today announced an Rs 11,370-crore IPO, fixed the price band of Rs 855-912 per share for the issue that will make it the second largest share sale in the country's capital markets history.

If fully subscribed at the upper end of the price band, this will be the largest public float by a domestic company after the October 2010 offer by Coal India which had raised Rs 15,000 crore.

Through the initial share sale, the national reinsurer will dilute 14.22 per cent of its post-offer paid-up equity share capital. Of this, government will dilute 12.26 per cent stake and the balance 1.96 per cent by the Corporation itself, chairman Alice G Vaidyan told reporters here.

The IPO opens on October 11 and closes on 13.

The company has fixed the price band at Rs 855-912 per equity share of face value of Rs 5 each and comprises afresh issue of 1,72,00,000 equity shares by Corporation and an offer for sale of 10,75,00,000 equity shares by its promoter. The offer includes a reservation aggregating up to 11,68,00,000 for subscription by eligible.

For the first quarter of the current fiscal, the Corporation had booked net profit of Rs 390 crore massively down from Rs 704 crore a year ago. Vaidyan said the numbers fell massively due to the changes in actuarial calculation as well as higher provisions made for a possible losses arising from the PM's crop insurance scheme under the IBNR (incurred but not reported) losses.

Driven by crop reinsurance, its gross premium grew 189 per cent at Rs 17,195 crore for reporting period from Rs 5,941 crore a year ago. Share of crop reinsurance alone was at Rs 9,925 crore and the chairman expects crop insurance to clip past 15-20 per cent this fiscal.

The combined ratio of the Corporation, which enjoys 60 per cent of market share, is currently at 99.7 per cent.

The Corporation is likely to become 10th largest reinsurer in the world within a year as it plans to acquire a syndicate at Lloyd's next fiscal.

Axis Capital, Citigroup, Deutsche India, HSBC Securities and Kotak Capital are the book running lead managers to the offer.