Govt to sell 6.78% stake in GIC Re via OFS, sets floor price at Rs.395/share

The shares of General Insurance Corp of India (GIC Re) saw a significant decline on Wednesday as the Indian government initiated the sale of a 6.78% stake in the company. This sale marks a strategic move by the government to reduce its stake in the state-owned reinsurer, with a targeted price of Rs 395 per share. The market’s reaction was swift, with GIC Re’s stock plummeting to its lowest level in over two weeks.

Government’s Strategic Stake Sale

The Government of India has announced its plan to sell a total of 11.90 crore shares in GIC Re, each with a face value of Rs 5. The process began with a base offer of 3.39% equity available to non-retail investors on Wednesday. Retail investors and employees will have the opportunity to participate starting Thursday, with an additional 3.39% equity on offer. Additionally, 50,000 equity shares have been set aside specifically for the company’s employees, demonstrating the government’s attempt to involve all stakeholder groups in the sale.

Market Reaction and Stock Performance

The announcement of the stake sale had an immediate impact on GIC Re’s stock price. The shares fell more than 5% making a day low of Rs.399.15, the lowest point since August 19. This drop was more pronounced than the overall market decline, as the benchmark Nifty 50 index only fell by 0.67% on the same day. Despite this setback, GIC Re’s stock has shown robust performance over the longer term, gaining 78% over the past year and 30.5% on a year-to-date basis.

Conclusion: The government’s decision to offload a portion of its stake in General Insurance Corp of India has led to a notable decrease in the company’s share price. As the sale opens to retail investors and employees, it will be interesting to observe how the market responds and whether the share price stabilizes in the coming days. The stock of GIC Re currently trades at Rs.399.45 per share down by 5.27% from its previous day’s closing price.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.