Govt Will Sell One Insurance PSU To Private Firms: Successful LIC IPO Is The Reason?

Govt Will Sell One Insurance PSU To Private Firms: Successful LIC IPO Is The Reason?
Govt Will Sell One Insurance PSU To Private Firms: Successful LIC IPO Is The Reason?

The government may privatise one of its general insurance companies this year after the LIC IPO.

The Ideal Candidate

It will begin work on identifying one from its three general insurers—National Insurance Co, United India Insurance Co and Oriental India Insurance.

After their first-quarter earnings are out the government will start work towards the selloff.

United India Insurance reported a loss of Rs 1,485 crore in 2019-20, and is considered as the best candidate for privatisation.

It is the ideal candidate due to its nationwide presence and solid market share in various insurance categories.

GoM To Make Decision

Its losses lowered to Rs 985 crore in FY21, and the trend will likely continue in FY22.

NITI Aayog is also likely to pitch United India Insurance to a core group of secretaries on disinvestment.

However, nothing is finalised yet.

The final call will be taken by a group of ministers (GoM).

Merger Considered

The government had once considered merging National Insurance, United India Insurance and Oriental India Insurance into a single entity and then list it on stock exchanges.

Then in 2020, it infused Rs 12,450 crore in them in the hopes that they will achieve profitable growth as independent entities.

Public Insurer To Be Privatised Before PSB

Sources say that four to five private insurers have shown interest in the insurance privatisation process.

Some of them have also met with officials of the department of financial services over the past few months.

These developments have given the government confidence to launch the privatisation of a public sector insurer ahead of a public sector bank.

Privatising Insurers Vs Privatising PSBs

Privatising insurers will be easier since the Parliament has already amended the General Insurance Business Nationalisation Act, allowing the government to dilute its stake in a general insurer below 51%.

This is different from privatisation of public sector banks, where an amendment to the Banking Regulation Act is yet to be introduced in Parliament.

Successful IPO

The LIC IPO, meanwhile, continues to receive great response as it garnered another Rs 5,000 crore worth of bids.

Investors have poured Rs 20,269 crore into the country’s largest-ever IPO in first three days of its launch.

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