Taking cue from ONGC buyout of HPCL, the government may look at replicating the same in the insurance sector by asking a cash rich PSU general insurer to buyout the smaller ones. A finance ministry official said apart from buy out by cash-rich general insurers, a share-swap could also be considered for smaller insurers. In the 2018-19 Budget, Finance Minister Arun Jaitley proposed merging three public sector general insurance companies--National Insurance Co Ltd, United India Insurance Co Ltd and Oriental India Insurance Co Ltd--into a single insurance entity. The merged entity would be subsequently listed on the bourses. The official said if an insurer buys stake in another, the government will get some money in return of its stake. "Cash rich insurers may be asked to buy out the smaller ones where there is operational synergy.
A share swap could also be considered," the official told PTI.
As on March 31, 2017, Oriental India Insurance Co had cash and bank balance of Rs 23.57 billion compared with Rs 19.16 billion held by United India Assurance Co and Rs 15.87 billion by National Insurance Co. In January 2018, ONGC announced acquisition of government's entire 51.11 per cent stake in oil refiner HPCL for Rs 369.15 billion. The proceeds from ONGC-HPCL deal helped government peg the revised disinvestment target for current fiscal at Rs 1 trillion, besides restricting the fiscal deficit at 3.5 per cent of GDP. In the current fiscal which will end in March, two other PSU general insurers -- General Insurance Corp and New India Assurance Co Ltd-- got listed on the bourses. The initial public offering of these two companies had fetched Rs 209.72 billion to the exchequer.
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