the story So Far: center is India’s largest insurance firm set to list state-owned Life Insurance Corporation of Indiaon stock exchanges to help meet the disinvestment targets for the year. The IPO was approved by the Cabinet Committee on Economic Affairs in July. Earlier, actuarial firm Milliman Advisors was appointed to assess the embedded value of LIC. in present, At least 16 merchant bankersGlobal companies including HSBC, Goldman Sachs, Bank of America, Citigroup and BNP Paribas are in the running for help in managing the public issue. It is expected that the government can announce its choice soon. Thereafter, a Group of Ministers constituting the Alternative Mechanism on Strategic Disinvestment will approve the actual quantum to be placed on the proposal.
Why is LIC bringing a public offering?
The government has found it difficult to meet its disinvestment targets in recent years. The stake disinvestment in Air India and BPCL has been delayed due to several reasons, including COVID-19, and may bear fruit in this financial year. an ambitious near the center Disinvestment target of ₹1.75 lakh crore For FY 22. A successful LIC IPO, in which the government will sell a major stake, will help achieve this goal. Although the date has not been announced, the listing of LIC is expected in the third or fourth quarter of 2021-22.
How much can the Center raise through IPO?
Chief Economic Adviser K. Subramaniam said in March that LIC’s IPO can bring up to ₹ 1 lakh crore. While the LIC Act 1956 has been amended to allow listing, details as to the number of shares on offer or the price band are not yet out. The amendments allow the authorized share capital of LIC to be increased to ₹25,000 crore, divided into 2,500 crore shares of ₹10 each.
How will it benefit the people with the policies?
The government has said that it will reserve up to 10% of the issue size in the IPO for LIC policyholders. The 2021 amendment to the LIC Act states, “Any reservation made by a corporation on a competitive basis in a public issue in favor of its life insurance policyholders … shall be made on a competitive basis for employees. in issue”. Markets regulator SEBI rules that the total amount of reservation for employees and firm allocation in an issue should not exceed 10% of the proposed issue amount. Market rules also stipulate that an issuing company can offer shares to employees at a maximum discount of 10% over the minimum price. There are reports that the government may offer a discount on the issue price for LIC policyholders. At present, LIC pays 5% of its surplus to the government and the rest to the policyholders. This may change as it will become accountable to shareholders for dividend payments. However, the sovereign guarantee by the government for the policies will continue even after the IPO.
Why are you talking about a split IPO?
The stock market has seen several public offerings recently, such as a food delivery facilitator. Zomato’s collection of ₹ 9,375 crore. Overall, investors were just hungry to absorb ₹27,000 crore in IPOs between April and July. financial service provider Paytm has also prepared an IPO of ₹ 16,600 crore — Topping, making it the biggest ever in India Coal India’s ₹15,200 crore offer in 2010. Until the LIC IPO hits the road, investors may not have enough appetite to absorb the entire offering in one go. This will be a first of its kind offering in the country, with the second tranche of the IPO being split into two and a follow-on offer.
What changes did SEBI make to ease the LIC IPO path?
In February, SEBI changed its rules to allow promoters of companies with post-IPO market capitalization of Rs 1 lakh crore to reach 10% public stake in two years and increase that figure to 25% in five years. Gave. Earlier, any company with a market cap of Rs 4,000 crore and above had to acquire 25% public stake in three years.
Read also | Efforts to privatize LIC have failed once again: AIIEA Secretary General
Why is the market expected for this IPO?
Life insurance in India is still nascent, with only 2.82% penetration as of 2019, As per insurance regulator IRDAI. So, the addressable market is huge. Two, almost two decades after private players were allowed entry, LIC’s market share is still at an all-time high of 66.2%, according to IRDAI’s FY20 report. According to primeinfobase.com, the value of equity holdings of India’s largest institutional investor LIC touched an all-time high of ₹7.24 lakh crore as of March 31, 2021 – in nearly 300 companies in which it held at least 1% stake.
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