IRDA has announced the detailed final guidelines for IPO for life insurance players
IRDA has opened the doors of capital market for life insurance players by announcing the final guidelines for IPO on Thursday. The guidelines have also been approved by SEBI.
As stated earlier by IRDA, insurers who have completed ten years of operation and also have embedded value (EV) twice the paid-up equity capital are allowed to participate in the capital market. Considering these rules, out of 24 players, four (ICICI Prudential Life Insurance Co. Ltd, SBI Life Insurance Co. Ltd, HDFC Standard Life Insurance Co. Ltd and Reliance Life Insurance Co. Ltd) are eligible to raise money from the market.
But in the current market conditions, none of the players are ready to tap the market. “We are not in a hurry to raise money from the market. IRDA has given us an opportunity which we will utilize at the right time,” said a top official from a leading life insurance company.
The guidelines provide detailed norms on disclosures to be made by life insurers wanting to raise capital from the public. The rules further require issuer companies to get their EV reviewed by two independent actuarial experts, apart from internal valuation exercises. While floating public issues, IRDA will hold the right to dictate the extent of dilution of stake by promoters, the maximum subscription that can be allotted to foreign investors and the minimum lock-in period for promoters after the issue. The current rules allow a maximum of 26% to be held by foreign investors.
“We welcome the guidelines announced by the IRDA. This is an important enabling step for life insurers to plan their capital raising strategies. Companies will, however, plan their individual strategies depending on various factors,” said Puneet Nanda, executive director, ICICI Prudential Life.
Insurers who are interested to go public have to mandatorily disclose a record of policyholder protection and the pendency of the policyholder complaints for the last five years in the draft red herring prospectus to be filed with SEBI.
According to guidelines, no life insurer can approach SEBI for IPO approval without going to IRDA first. IRDA’s approval for an IPO will only be valid for a year, within which the company can approach SEBI.