The listing of 5 state-owned general insurance companies was approved by the government today to encourage them to raise funds from capital markets as also improve corporate governance.
The Cabinet approved the listing of public sector general insurance companies through a combination of fresh issuance of shares or Offer for Sale, Finance Minister Arun Jaitley said.
The government shareholding in these companies will be reduced from 100 per cent to 75 per cent in one or more tranches over a period of time, he said.
The Cabinet Committee on Economic Affairs, headed by Prime Minister Narendra Modi gave 'in principle' nod for listing five government owned General Insurance Companies -- New India Assurance Company, United India Insurance, Oriental Insurance Company, National Insurance Company and General Insurance Corporation of India (GIC).
"All procedural formalities are over. Now the companies will have to comply with the listing requirements with stock exchanges and Sebi," he said when asked whether they will be listed in the current financial year, ending on March 31.
During the process of disinvestment, he said, the existing rules and regulations of Securities and Exchange Board of India (Sebi) and Insurance Regulatory and Development Authority of India (IRDAI) will be followed.
"Whatever are the regulations, they have to comply with that," he said, when asked if the companies will initially divest 10 per cent stake as per the regulatory requirement.
He said listing on the stock exchange necessitates compliance with a number of disclosures and accounting requirements of Sebi, which acts as an additional oversight mechanism.
The disclosures bring about transparency and equity in the companies functioning, he added.
Listing is expected to lead to improved corporate governance and risk management practices leading to improved efficiency, he said, adding that a greater focus on growth and earnings can also be expected.
Listing will open the way for the companies to raise resources from the capital market to meet their fund requirements to expand their businesses, instead of being dependent on the government for capital infusion.