Document Detail

Title: To all insurers
Reference No.: INV/CIR/046/2004-05
Date: 08/11/2004
INVESTMENTS IN EQUITY SHARES THROUGH IPOs
As per the current regulations, Investment in Equity Shares issued through Initial Public Offer (IPO) has to be categorised as “Other than Approved Investments”. However, in the context of IPO issues, by well known Corporates, where the issue size is fairly large and the (issuer) Corporates are known to have good performance record and sound financials, suggestions have been received to consider some relaxation in respect of Equity Shares of such Corporates, through IPO issue so as to categorise under “Approved Investments”.
Arising out of this suggestion the following criteria are proposed after considering the comments received from Insurers in this matter. Equity shares offered through IPOs which satisfy all of the following criteria  may be categorised as “Approved Investments”.
  1. Equity Shares are being “listed” through IPO.
  2. Size of the issue of Equity Shares through IPO, including offer for sales is not less Rs.500 Crores.
  3. Number of shares offered is not less than 5 million shares.
  4. The company issuing shares through IPO shall belong to a financially sound Group with good performance record, for which the Insurer’s Board shall lay down the criteria.
  5. Performance track record of the company including Earnings and Dividend record, Dividend Criteria is satisfied:
    1. for at least 7 past years as “unlisted” company as prescribed in the Insurance Act (Sec 27A) in the case of Life Insurance Companies
    2. for at least 3 past years as “unlisted” company as prescribed in the Insurance Act (Sec 27B) in the case of General Insurance Companies,
Provided, in the case of Investee Companies, formed out of ‘de-merger’ of a parent company, issuing shares through IPO, the performance track record would apply with reference to the parent company.
  1. The Investment in Equity Shares should comply with prudential and exposure norms as prescribed and in particular, Note No 7 to Section 3 and 4 of IRDA (Investment) Regulations, 2000 (as amended) i.e., “actively traded” and “liquid instrument” conditions should be satisfied within 3 months from the date of listing.
  2. Such investments shall be subject to periodical review, particularly as to Approved status.
  3. The Board of the Insurers shall empower its Investment Committee to approve Investment in equities through IPOs, satisfying the above criteria.
 Any investment made in IPOs, which do not satisfy the above conditions, shall fall under ‘Other than Approved Investments’.
 The details of all investments in Equity Shares through IPOs shall be filed with the Authority within 30 days thereof.
 
C S RAO
CHARIMAN

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