The infusion will be done after the supplementary demands for grants is passed by Parliament which will reconvene on March 8. The capital infusion will enable the three public sector general insurance companies to improve their financial and solvency position, meet the insurance needs of the economy, absorb changes and enhance the capacity to raise resources and improve risk management.
Insurance stocks edged higher at opening on February 15 after Finance Ministry said it will infuse Rs 3,000 crore capital into state-owned general insurance companies during the current quarter in a bid to improve their financial health.
The Cabinet had also decided to increase the authorised share capital of National Insurance Company Limited (NICL) to Rs 7,500 crore and that of United India Insurance Company Limited (UIICL) and Oriental Insurance Company Limited (OICL) to Rs 5,000 crore each to give effect to the capital infusion decision.
Insurance-related stocks including names like General Insurance Corporation of India was up 3 percent while that of ICICI Prudential Life Insurance Company was trading at Rs 493.55, up Rs 6.15, or 1.26 percent.
Share price of New India Assurance Company along with SBI Life Insurance and HDFC Life Insurance Company added a percent each.
Also Read: Finance Ministry to infuse Rs 3,000 crore in general insurance companies this quarter
Recently, the government sought Parliament nod for gross additional expenditure of Rs 6.28 lakh crore for 2020-21 as part of the second and final batch of supplementary demands for grants. This included Rs 3,000 crore for providing additional funds towards recapitalisation of insurance companies.
The infusion will be done after the supplementary demands for grants is passed by Parliament which will reconvene on March 8. The capital infusion will enable the three public sector general insurance companies to improve their financial and solvency position, meet the insurance needs of the economy, absorb changes and enhance the capacity to raise resources and improve risk management.
Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2021-22 on February 1, said the foreign direct investment (FDI) limit in India’s insurance sector will be hiked to 74 percent from 49 percent.
At the face of it, the proposal is a positive development for the country’s insurance industry that has been saddled with dual issues of stagnating growth amidst the COVID-19 pandemic and rising needs for capital infusion.
Rohan Patil, Technical Analyst at Bonanza Portfolio suggests buying SBI Life Insurance Company with a target price of Rs 990 and ICICI Prudential Life Insurance Company with a target price of Rs 510 per share.
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