The LIC IPO would be both significant and imperative for the Government to meet its disinvestment target of Rs 1.75 lakh crore. The stake sale is expected to raise between Rs 40,000 crore to Rs 1 trillion.
Department of investment and public asset management (DIPAM) secretary Tuhin Kanta Pandey said on Wednesday that state-insurer Life Insurance Corporation of India (LIC)'s IPO is expected to take in the fourth quarter of the current fiscal year. He was speaking at the CII Global Economic Policy Summit 2021.
Several media reports have suggested that the state insurer's IPO is expected to rise between Rs 40,000 crore to Rs 1 trillion. The government might allow foreign direct investment in the state insurer to enable a diversified and stronger demand across varied segments of investors.
Several banks are expected to reach out to potential anchor investors for the initial public offering of LIC, next week, says a report of Business Standard. The banks plan to file the draft prospectus with markets regulator SEBI by the first week of December. This would be after the embedded value of the company is finalised.
Embedded value helps gauge the cumulative value of shareholders' interest in an insurance company. It is the sum of the present value of future profits and the net asset value of the company's surplus and capital combined. The present value helps capture potential profits in future from already existing policies. The net asset value of capital and surplus calculates the funds belonging to shareholders accumulated in the past.
The government has selected Goldman Sachs, JP Morgan Chase & Co, ICICI Securities, Kotak Mahindra Bank, Citigroup, SBI Capital Market, Axis Capital, Bank of America Securities, Nomura among others for the stake sell.
Finance Minister Nirmala Sitharaman mentioned in a press conference last month that the government is seeking to get the IPO of the state-backed life insurer by March 2022. She added that any delay would not be due to a lack of political will.
In her budget address this year, she had set a disinvestment target of Rs 1.75 lakh crore for the current fiscal. The public-sector undertaking listed to be put up for disinvestment included IDBI Bank, BPCL, Shipping Corp, Container Corporation, Neelachal Ispat Nigam Ltd, Pawan Hans and Air India. She had mentioned that amendments to the existing legislation would be bought so as to facilitate the IPO of LIC in 2021-22.