General insurance companies will be allowed to tap the capital market only if they have completed 10 years in business. Also, they need to get prior approval from the insurance regulatory.
“No general insurance company shall approach SEBI (Securities and Exchange Board of India) for public issue of shares and for any subsequent issue, by whatsoever name called, under the ICDR (Issue of Capital and Disclosure Requirements) regulations without the specific previous written approval of the authority concerned,’’ said the Insurance Regulatory and Development Authority (IRDA) in its draft guidelines for IPO (initial public offer) by general insurance companies. Titled the “IRDA (Issuance of Capital by General Insurance Companies) Regulations, 2012’’, these will come into force on the date of their publication in the official gazette.
The guidelines will cover divestment by promoters either through the issue of capital under ICDR Regulations or via divestment of equity by one or more of the promoters through a public offer for sale under the ICDR Regulations.
According to the draft guidelines, the approval granted by IRDA for an IPO will have a validity of one year. The applicant company has to file the draft red herring prospectus with the SEBI within that one year.
The IRDA will also “reserve the right not to accord its approval if, in its opinion, the applicant company is not compliant with the regulatory framework; or where it may be detrimental to the interest of the policy-holders; or it may not be in the interest of the insurance business in the country.”
While granting approval for the IPO, the IRDA will consider the financial health, the regulatory records, IPO proposal per se, the capital structure post-issue and the purpose of capital-raising programme of the applicant company.
The IRDA will also prescribe the lock-in period for the promoters from the date of allotment of shares. Also, the insurance regulator will also specify the extent of promoters’ dilution, and the share allotment to foreign investors. The draft guidelines also prescribe additional disclosures by the applicant company in the prospectus and offer documents. These are risk factors specific to the insurance business.
The insurance regulator has asked the general insurance companies to come out with their views on the draft guidelines by the end of this month.
