The central government is asking around 50,000 crore from the IPO of state-owned insurer Life Insurance Corp (LIC) next month, Bloomberg reported on Tuesday.
The report said that the government is in discussion to sell 7% stake in LIC through listing. At 7% stake sale, LIC IPO will be the biggest ever in the history of Indian stock market and once listed the market valuation of LIC will be at par with top companies like RIL and TCS.
Till date, the amount raised from Paytm’s IPO in 2021 was the largest ever 18,300 crore, followed by Coal India (2010) approx. 15,500 crore and Reliance Power (2008). 11,700 crores.
According to the DRHP, the plan was to sell around 31.6 crore shares or 5% stake, which is expected to be received around 60,000 crores in the exchequer.
The government has time till May 12 to launch the IPO without filing fresh papers with markets regulator SEBI.
Keeping an eye on that, the government aims to start the share sale before the offer expires.
The government and its advisors are considering a valuation of around 1.25 to 1.5 times the embedded value of LIC. Officials are still discussing possible terms of the offering, and the fundraising target could still change.
The listing is a key part of Prime Minister Narendra Modi’s administration’s plans to divest state assets to reduce the budget deficit.
Recently, the government has filed updated draft papers with markets regulator SEBI, containing the insurance giant’s December quarter financial statements.
In February, the government filed a draft red herring prospectus (DRHP) with the regulator detailing the financial results as of September. SEBI had approved the DRHP in March.
The LIC IPO has been postponed 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 offer of the state-run company, but the Center will go ahead with the IPO only if it is confident of a successful listing.
The embedded value of LIC, which is a measure of the value of consolidated shareholders in an insurance company, was pegged at approx. 5.4 lakh crore by international actuarial firm Milliman Advisors till September 30, 2021. Though DRHP does not disclose the market valuation of LIC, by industry standards it would be around 3 times the embedded value.
LIC’s net profit increased Rs 235 crore as against marginal in third quarter 94 lakh in the same period last year. Similarly, the net profit for the nine-month period ended December rose to Rs. to 1,643 crore 7 crore a year ago.
The sharp jump in LIC’s profits is largely due to the change in surplus distribution model. The LIC Act has been amended to bring its surplus distribution model on par with that of private life insurance companies.
download
The app will get 14 days of unlimited access to Mint Premium absolutely free!