Shares of General Insurance Corporation of India (GIC Re) experienced a significant decline of over 6% in Tuesday's trading session, following the commencement of the government's Offer for Sale (OFS) targeting non-retail investors. The state-owned reinsurer's stock dropped 6.42% to Rs 363.40 apiece on the BSE.
The government has set the floor price for the OFS at Rs 352 per share, representing a 9% discount from the previous day's closing price. By late morning, non-retail investors had placed bids for 71,41,612 shares, accounting for 22.67% of their allocated quota of 3,15,79,200 shares. This initial reception aligns with some brokerage expectations of a negative immediate market reaction.
OFS Aimed at Meeting Shareholding Norms
The primary objective behind the government's stake sale in GIC Re is to comply with the minimum public shareholding (MPS) norms mandated for listed companies. As of the March quarter, the government held an 82.40% stake in GIC Re, necessitating a reduction to meet the 25% MPS requirement.
Through this OFS, the government aims to raise approximately Rs 3,087.74 crore. The base issue size comprises 2% of GIC Re's equity, translating to up to 35,088,000 shares. Should there be oversubscription, the government retains the option to sell an additional 3% of the company's paid-up equity, amounting to up to 52,632,000 shares.
Retail Bidding and Employee Allotment
While non-retail investors initiated their bids on Tuesday, a 10% portion of the OFS shares is reserved for retail investors, who will be able to place their bids on Wednesday. Additionally, a minimum of 25% of the offer shares are specifically reserved for mutual funds and insurance companies, provided their bids are at or above the floor price.
GIC Re has also made provisions for its eligible employees, offering up to 20,000 shares under the OFS guidelines. Non-retail investors who placed bids on Tuesday also have the option to carry forward and revise their un-allotted bids to Wednesday, for potential allocation from any unsubscribed portion of the retail segment.