Anil Ambani-controlled Reliance Group has received the Securities and Exchange Board of India's (SEBI) approval to float an initial public offering for its general insurance arm, Reliance General Insurance Co Ltd, a company statement said.
Reliance General Insurance had filed its draft prospectus with SEBI on 9 October. It did not mention the exact date of approval. The SEBI website typically publishes IPO information on a weekly basis.
The offer comprises a fresh issue of nearly 16.76 million shares, besides an offer-for-sale of nearly 50.31 million shares, the DRHP shows. The public issue will result in a 25% stake dilution on a post-issue basis, making the firm compliant with SEBI’s norms for at least 25% public float.
VCCircle was the first to report on the company’s plans to go for an IPO as well as merchant banker appointments.
The IPO size is estimated at Rs 1,500-1,600 crore ($230-245 million), said one person aware of the development.
Reliance General will join a growing list of insurance companies–both life and non-life–that are either listed or planning to go public. These include General Insurance Corporation (GIC Re), SBI Life Insurance Co, ICICI Lombard General Insurance, and New India Assurance.
ICICI Prudential Life Insurance became the first life insurer in India to go public last year.
Reliance Nippon Life Asset Management, the group’s mutual fund business, listed on the bourses earlier this month while the group’s home finance arm was de-merged into a standalone entity and listed on the stock market in October.
The company will use the proceeds from the fresh issue of shares to augment its solvency margin and, consequently, increase the solvency ratio, besides meeting its future capital requirements. The proceeds from the secondary sale will go to the promoters.
Motilal Oswal Financial Services, Credit Suisse Securities (India), Edelweiss Financial Services, UBS Securities India, Haitong Securities India, and IDBI Capital are the merchant bankers managing the IPO.
Reliance General Insurance was incorporated in August 2000. It is majority-owned and operated by Reliance Capital Ltd, the group’s diversified financial services company. It offers general insurance products, including motor insurance for cars, two-wheelers and commercial vehicles, health insurance, travel insurance and home insurance.
The country's fourth-largest private general insurer also offers corporate insurance including fire, engineering, marine, liability and package insurance; small and medium-sized enterprise (SME) insurance for burglary, housebreaking, fire, package, marine and group mediclaim; and education insurance to individuals, SMEs and and corporate clients.
It reported a net profit of Rs 44.25 crore for the six months ended June 2017 on gross direct premium income (GDPI) of Rs 1,201.49 crore. For 2016-17, the company’s net profit stood at Rs 128.72 crore, on GDPI of Rs 3,938.35 crore.
Its insolvency ratio stood at 1.7 times as on June 2017 compared with the regulatory requirement of 1.5 times.