The primary market will see the first ever public offering by a reinsurer player General Insurance Corporation (GIC) in India. The 44- year old state owned PSU is all set to create many records.
GIC is all set to emerge as the top ten most valued public sector companies in India. The 44- year old corporation, which is in the reinsurance business (offering insurance to direct insurance companies), has net worth of close to Rs 50,000 crore and total assets of Rs 100,000 crore. The weighted average earning per share (EPS) for 2016-17 is at Rs 32 per share. The estimated market valuation of the corporation, as per the market, will be around Rs 1,00,000 crore.
GIC will join the elite PSU club. Currently, the top listed PSUs are SBI, Indian Oil, ONGC, Coal India, NTPC, Power Grid and HPCL. State Bank of India has the highest market capitalization of Rs 2.42 lakh crore followed by OIC, ONGC, Coal India and others. HPCL, which is at the night place, has a market capitalization of Rs 1.10 lakh crore. GIC is mostly likely to take the 10th place or even move higher depending upon the listing price. Many recently listed companies are enjoying a very high price to earnings (P/E) multiple of over 30-35.
Amongst the financial services especially listed banks, the GIC will be next to SBI. The second largest PSU bank in term of market capitalization is Bank of Baroda, which is at Rs 71,017 crore.
A big opportunity for retail investor to take part in a well run PSU. After Coal India in 2010, GIC will be the largest PSU IPO, which is set to mobilize over Rs 10,000 crore. GIC Re would be the first re-insurance player listed on the domestic bourses. In fact, many direct insurance players are exploring the IPO option.
The price discovery in GIC will lessen the burden of government for recapitalization as it can raise resources directly from the market. Given the high growth post agri and health insurance, GIC will require capital for expansion.
There are also risks. While the issue looks good, there are also risk in the re-insurance space as the exposure of GIC is increasing big time in the agriculture space. The corporation has seen a huge jump in the agri reinsurance premium from Rs 644 crore in March 2015 to Rs 9,752 crore in March 2017. Many say the agri-reinsurance is a new business for GIC where there is no past track record. "It's a high risk business," says a market player. In addition, the global re-insurers are also gradually increasing their presence in India, which has the potential to upset the calculations of GIC. In fact, global players are allowed underwrite business in India without setting up a brick and mortar office.