The union government is seeking around ₹50,000 crore next month from the IPO of state-owned insurance giant Life Insurance Corp. (LIC), Bloomberg reported on Tuesday.
The government is discussing selling as much as a 7% stake in LIC through the listing, the report noted. At 7% stake sale, the LIC IPO would be biggest ever in the history of Indian stock market and once listed LIC’s market valuation would be comparable to top companies like RIL and TCS.
So far, the amount mobilised from IPO of Paytm in 2021 was the largest ever at ₹18,300 crore, followed by Coal India (2010) at nearly ₹15,500 crore and Reliance Power (2008) at ₹11,700 crore.
According to the DRHP, the plan was to sell about 31.6 crore shares or 5% stake, which is estimated to fetch around ₹60,000 crore to the exchequer.
The government has time till 12 May to launch the IPO without filing fresh papers with market regulator Sebi.
Keeping an eye on that, the government is aiming to launch the share sale before current approvals for the offering expire.
The government and its advisers are considering seeking a valuation of about 1.25 to 1.5 times LIC’s embedded value. Officials are still discussing potential terms of the offering, and the fund-raising target could still change.
The listing forms a key part of plans by Prime Minister Narendra Modi’s administration to divest state assets to fund a yawning budget deficit.
Recently, the government has filed updated draft papers with market regulator Sebi, incorporating December quarter financials of the insurance behemoth.
In February, the government filed the draft red herring prospectus (DRHP) with the regulator giving details of financial results till September. Sebi has cleared the DRHP in March.
LIC IPO has been put off to May and later amid volatile markets in the wake of Russia-Ukraine conflict.
Disinvestment secretary Tuhin Kanta Pandey had earlier said that there is strong investor interest for the state-run company’s offer, but Centre will proceed with the IPO only when it is confident of successful listing.
LIC’s embedded value, which is a measure of the consolidated shareholders value in an insurance company, was pegged at about ₹5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors. Although the DRHP does not disclose the market valuation of LIC, as per industry standards it would about 3 times the embedded value.
LIC’s net profit rose to ₹235 crore in the third quarter as against a meagre ₹94 lakh in the same period last year. Similarly, net profit for the nine months period ended December surged to ₹1,643 crore from ₹7 crore a year ago.
The sharp jump in LIC profit is largely due to the change in the surplus distribution model. The LIC Act has been amended to bring its surplus distribution model at par with private life insurers.
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