Kolkata-based National Insurance has postponed its initial public offering (IPO) to the next financial year. Earlier, the public sector insurer was expected to come out with its IPO by March 2018.
"It seems that now the IPO would only happen in the next financial year, as the government is more occupied with Budget preparations," said K Sanath Kumar, chairman of National Insurance, told Business Standard.
After the IPOs of New India Assurance (NIA) and General Insurance Corporation (GIC), National Insurance was next in line. Notably, the IPO of the companies received a lukewarm response from retail investors. The Kolkata-based insurer had drawn inputs from both the IPOs, and had submitted them to the government.
"We have presented the government with various scenarios, as to how much we can raise and what is the growth capital requirement over the next years. It is now up to the government to decide on price band etc.," said Kumar.
Analysts said large issue size and high price were key reasons for the poor response of IPOs of other public sector insurance firms. Due to the high share price, retail investors did not foresee any listing gain. Also, the combined ratio, a key measure of financial health for insurers, calculated by diving the sum of claim-related losses and general business costs by the earned premiums over a period, has been higher for public sector firms.
For NIA, the IPO price band was Rs 770-800; for GIC, Rs 855-912. Against this, it was Rs 651-661 a share for private sector ICICI Lombard, which also went for an IPO recently. Retail subscription for NIA was around 11 per cent; for GIC, 60 per cent. For ICICI Lombard, it was around 1.2 times the number of shares on offer in the segment.
Also, since a lot many IPOs of the insurance companies had got bunched up in the last few months, the government wanted to keep a time gap with the next public sector insurance IPO, according to sources at National Insurance.
Although sitting on a huge pool of investments, public sector general insurance companies have been struggling to make profits out of the core business. At the end of 31st March 2017, National Insurance's combined ratio was as high as 134.93 per cent, although its solvency ratio had improved to 1.90 per cent at the end of March 2017, against 1.26 per cent at the end of September 2016.
Similarly, NIA's combined ratio has consistently remained high for five years, at more than 115 per cent, according to a report by Angel Broking. In 2016-17, the company reported a combined ratio of about 120 per cent, the report adds, though this had improved in the final quarter to 112.57 per cent. It was 118 per cent at the end of the first quarter of the present financial year.