Reliance to test water with insurance IPO
Reliance Capital is planning to become one of the first Indian companies to test the waters of the country's bullish post-election stock market with an initial public offering of its life insurance unit.
The offering of Reliance Life Insurance, part of the group controlled by billionaire industrialist Anil Ambani, would be the first listing of a life insurance or general insurance company in India.
Sam Ghosh, chief executive of Reliance Capital, said: "We are thinking of selling 10 per cent or 26 per cent, either through an IPO only or through an IPO plus a stake sale to a strategic partner."
The move would signal a revival of India's moribund market for equity offerings, which has yielded few offerings since its peak in January last year, when another Anil Ambani-controlled company, Reliance Power, staged the country's largest listing.
Cash-starved Indian companies are hoping the good times are on their way back after the Bombay Stock Exchange's benchmark index surged a record 2,000 points last Monday following the election of a stable government.
The market ended the week up 14 per cent at 13,887.15 points with more gains expected if the Congress party-led government introduces long-awaited reforms in insurance and pensions and revives the privatisation programme for state-owned enterprises.
Reliance Capital bought its life insurance unit four years ago from Australia's AMP and its Indian joint venture partner Sanmar.
Mr Ghosh said Reliance owned 100 per cent of the company, giving it the freedom to sell up to 26 per cent to foreign investors, as permitted by Indian rules on foreign direct investment in the sector.
He did not say how much the company plans to raise from the market but said Reliance Life has total premiums of about $1bn and is the fourth-largest operator in India's life insurance market. It employs 25,000 people and has 150,000 agents.
"This will set a value for what Indian life companies are worth. There are a lot of valuations floating around out there, but now we can let the market decide."
He said the company would appoint an investment bank next week to arrange the listing process, which it expected would take about three months.
On whether the market would remain buoyant enough to support new listings, Mr Ghosh said he expected it to sustain itself at about the present levels.
"Retail investors have enough money that if something good comes along, they will invest," he said.