The upcoming Budget is likely to provide a timeline roadmap for the long pending merger of the three general insurance PSUs for speeding up the process which was first announced in the 2018 Budget.
“The merger of three companies namely National Insurance Co Ltd, United India Insurance Co Ltd. and Oriental Insurance Co Ltd is under process as several steps have been initiated and are expected to be completed by 2019-20”, the interim budget had said in its “status of implementation”.
Ernst & Young has been appointed to advise on merger Of three state-run general insurers. But there has been no major advancement in the process so far.
There will be some announcements in the Budget on the timeline of the insurance merger but sticking to it also would not be so easy given the poor financial health, giant task of regionally tuned policies, software update, branch rationalisation, manpower gainfully deployment, policies merger and streamlining, sales and marketing functions, merging them into a united brand and ultimate listing. Hurrying up would not help but the merger also cannot be in pendency for unlimited years as it gives rise to uncertainty among the insurers and customers.
The regular Budget of 2019-20 is likely to set a timeline for the merger of these insurance companies regarding the route to be taken for the merger and its likely completion in the next six months.
The listed United Insurance Company has made losses in 2018-19. Oriental insurance is unlisted and National Insurance which is listed recently sought time from the BSE to submit last fiscal result.
“We would submit to the Exchange that during the financial year 2018-19, majority of our operating offices have been working on two different IT systems, which necessitates the Company to prepare the Accounts on dual software platforms causing the delay in the adoption of the Accounts within the stipulated time period. We foresee a delay in finalising the Accounts of the Company for the financial year 2018-19 and it is likely that the same will be submitted by end of June 2019,” it said.
The Department of Investment and Public Asset Management (Dipam) and Department of Financial Services have discussed the issues halting the merger issues like HR, software, branch rationalisation, trimming down of losses but since consolidation is a roadmap in the financial services sector of the government, the merger to happen on time holds importance to generate revenue and cut down on duplication and under-cutting of operations, cutting down on costs.
However, officials say Budget may provide a roadmap but it may not be possible in the next six months. The move if happens will help raise funds for its disinvestment corpus and take forward the overall strategy of consolidation in the public enterprises’ space like some mergers in PSBs.
Even in CPSEs merger and acquisition that has taken place — HPCL had acquired ONGC and Power Finance Corporation’s had acquired Rural Electrification Corporation apart from those in PSU banks like Bank of Baroda-Dena Bank-Vijaya Bank. (MR, Inputs: Agencies).