IPOs in the insurance sector: myriad factors at play

Initial public offerings or IPOs in the Indian insurance sector have garnered much interest over the last couple of years. The spark that ignited this interest can be traced to Reliance Life Insurance Company Limited’s much publicized attempt to launch an IPO, which met with stern resistance from the Ministry of Finance and the Indian insurance sector regulator, the Insurance Regulatory and Development Authority (IRDA). Although a brief lull followed, which was filled with periodic promises from both the IRDA and the securities market regulator, the Securities and Exchange Board of India (SEBI), to jointly develop a framework for the listing of insurance companies, things appear to be back on track again. On 25 October a SEBI meeting discussed disclosure norms for insurance company IPOs.

There is no doubt that, in general, IPOs are the most popular route to raise money in the primary markets. However, their importance in the context of an insurance company increases manifoldly due to the opportunity that they present to Indian promoters for recovering their capital and given that such companies are, by their very nature, capital guzzlers. Given this background, the obvious question that arises is: why has there been a delay in letting Indian insurance companies list?

This month, we dig a little deeper to highlight some of the factors affecting plans by India’s insurance companies’ to go public.

Saket Shukla is a partner at the Delhi office of Phoenix Legal and can be reached at saket.shukla@phoenixlegal.in. Arun Madhu is a senior associate at the firm’s Mumbai office and can be reached at arun.madhu@phoenixlegal.in.