GIC Shares Fall Over 5% as Government Launches Rs. 3,000 Crore OFS; 5% Stake Up for Sale

Shares of General Insurance Corporation of India (GIC Re) came under pressure on Tuesday after the government launched an Offer for Sale (OFS) to divest up to a 5% stake in the state-owned reinsurer.The government's stake sale in GIC Re is expected to raise nearly Rs. 3,000 crore.

GIC Share Price Today

The GIC shares today opened 5.4% lower than its Monday's close of Rs. 387.25. At the time of writing GIC shares were trading at Rs. 366.50 down by 5.36% at around 9:46 AM.

GIC Re OFS Opens for Institutional Investors

The Offer for Sale opened for non-retail investors on June 16, while retail investors and eligible employees will be able to place bids on June 17.
The Department of Investment and Public Asset Management (DIPAM) announced that the government will sell up to a 5% stake in GIC Re at a floor price of rS. 352 per share. The offer consists of an initial 2% stake sale, with an additional 3% available through a greenshoe option if demand remains strong.

More than 8.77 crore shares are being offered under the OFS, so it is a major government stake sale in the insurance sector this year.
At the maximum issue size of 5%, the government is expected to mobilise approximately Rs. 3,000 crore from the GIC Re OFS. The proceeds will contribute to the Centre's disinvestment programme and help improve public float in the company.

Greenshoe Option in the GIC Re OFS

A major feature of the GIC Re OFS is the inclusion of a greenshoe option, which allows the government to sell additional shares if investor demand exceeds the base offer.

Under the current OFS, the government has initially offered a 2% stake, equivalent to 3.51 crore shares, which could fetch around Rs. 1,240 crore at the floor price of Rs. 352 per share. However, the government has also included a 3% greenshoe option, which will let it to sell an additional 5.26 crore shares if subscription demand remains strong.

If the greenshoe option is fully exercised, the total stake sale will increase from 2% to 5%, taking the overall divestment size to approximately 8.77 crore shares. This would boost the government's proceeds from Rs. 1,240 crore to nearly Rs. 3,090 crore, representing a 150% increase in funds raised through the OFS.