IPO-FPO proceeds to finance social sector schemes
The Government has approved capital infusion of Rs.4,400 crore into ECGC Ltd (formerly known as Export Credit Guarantee Corporation of India Ltd) over a period of five years from FY 2021-2022 to FY 2025-2026. The approved infusion, along with efforts made to suitably synchronize with the listing process of ECGC through the Initial Public Offering (IPO), will increase the underwriting capacity of ECGC to support more exports.
The capital infusion will enable ECGC to expand its coverage to export oriented industry particularly labour-intensive sectors. The approved amount will be infused in instalments thereby increasing the capacity to underwrite risks up to Rs.88,000 crore and this will enable ECGC to issue covers that can support additional exports of Rs.5.28 lakh crore over the five-year period based on current trends, said Ministry of Commerce and Industry in a release on 29 Sept 2021.
ECGC was established by the Government of India under Companies Act in 1957 to promote exports by providing credit insurance services to exporters against non- payment risks by the overseas buyers due to commercial and political reasons. It also provides insurance covers to banks against risks in export credit lending to the exporter borrowers. ECGC endeavours to support the Indian export industry with its experience, expertise and underlying commitment to progress and advance of India’s exports.
ECGC plays a wider role in supporting exports from labour-intensive sectors and encourage bank lending to enterprises of small exporters thereby leading to their revival.
ECGC is a market leader with around 85% market share in export credit insurance market in India, supporting Rs.6.02 lakh crore of exports in 2020-21, around 28% of India’s merchandise exports.
It has invested US$11.7 million in Africa Trade Insurance (ATI) so as to facilitate Indian exports to African market among other schemes.
A comprehensive “Agriculture Export Policy” to provide an impetus to agricultural exports related to agriculture, horticulture, animal husbandry, fisheries and food processing sectors, is under implementation
Trade Infrastructure for Export Scheme (TIES), Market Access Initiatives (MAI) Scheme and Transport and Marketing Assistance (TMA) schemes are among others to promote trade infrastructure and marketing.
The proposed listing of ECGC would unlock the true value of the company, promote ‘people’s ownership’ by encouraging public participation in the equity holding of the company and also promote Corporate Governance through transparency and greater accountability.
Listing may enable ECGC to mobilize fresh capital from the market either through the same IPO or subsequently through a Follow-on Public Offer (FPO) and thereby help in increasing the Maximum Liability cover for it.
The disinvestment proceeds will be used for financing of social sector schemes. #exports #banking #investment #credit /fiinews.com
