The initial public issue for Life Insurance Corporation of India (LIC) will be floated in the March quarter of this fiscal, assured disinvestment secretary Tuhin Kanta Pandey, amid speculations that the IPO might not be possible during the current financial year due to the lengthy valuation process and pending regulatory approvals.
“Some media speculation doubting the feasibility of LIC IPO this fiscal year is not correct,” Pandey, the secretary of department of investment and public asset management, said in a tweet, quashing rumours that the LIC IPO might be held up. “It is reiterated that plan is on course for the IPO in the last quarter of this fiscal.”
Talking to Fortune India, a company spokesperson maintained that reports claiming delay in LIC IPO are unfounded. The process to determine the valuation of the insurance major are underway and will be completed on time, he added. The spokesperson did not divulge details about the status of the LIC IPO, though.
The government is planning to divest 10% stake in LIC, looking to raise ₹80,000 crore from the issue. The IPO, being handled by the department of investment and public asset management, will be biggest yet in the country. The government is relying on divesting its stake in LIC and Bharat Petroleum Corporation Limited (BPCL) to meet the ₹1.75 lakh crore disinvestment target for the current financial year.
LIC, the largest life insurer in India, reportedly has assets under management to the tune of ₹31 lakh crore. As per IRDAI data, the insurer had a market share of 66.18% in the first-year premium during the year ended March 2021 at ₹1.84 lakh crore. It is also the largest institutional investor in the country, with a total investment of ₹120 lakh crore.
Recent reports claimed that there are issues related to valuation of LIC IPO that need to be addressed. Valuation of LIC is a complex process due to the insurer’s size, product mix, real estate assets, subsidiaries and profitability
Even after the valuation is ascertained, the IPO will have to be vetted and approved by market watchdog Securities and Exchange Board of India (SEBI), as well as Insurance Regulatory and Development Authority of India (IRDAI).
Finance minister Nirmala Sitharaman recently stated that the LIC disinvestment process is progressing as intended.
“The tying up of loose ends among bureaucracy and different departments consumes its own time and that is what we are trying to speed up,” she had said.
Sitharaman had said in her budget speech earlier this year that the LIC IPO would be launched during the financial year beginning April 1, 2021.
The Cabinet Committee on Economic Affairs (CCEA) had accorded in-principle approval for the listing of LIC in July. The government has already appointed 10 merchant bankers for the transaction. These include Goldman Sachs (India) Securities, Citigroup Global Markets India, Nomura Financial Advisory and Securities India, SBI Capital Market, JM Financial, Axis Capital, BofA Securities, JP Morgan India, ICICI Securities, and Kotak Mahindra Capital Co Ltd.
Moreover, the Centre made about 27 amendments to the Life Insurance Corporation Act, 1956, earlier this year to facilitate LIC IPO. As per the amendments, the central government will hold at least 75 per cent in LIC for the first five years post the IPO, and subsequently hold at least 51 per cent at all times after five years of the listing. As of now, the government owns 100% stake in LIC.
The authorised share capital of LIC shall be ₹25,000 crore, divided into 2,500 crore shares of ₹ 10 each, as per the amended legislation. Up to 10 per cent of the LIC IPO issue size would be reserved for policyholders.