LIC IPO likely to be filed soon, government insists on valuation of Rs 15 lakh crore

The so-called embedded value of Life Insurance Corporation of India is likely to exceed Rs 4 trillion, and its market value could be nearly four times that amount, the people said, asking not to be identified as the discussions are private. Once the final report is out, the assessment the government is seeking could change.

Embedded value, a key metric for insurers, combines the present value of future profits with the net value of an asset. The gauge will be part of LIC’s IPO prospectus, which is likely to be filed in the week beginning January 31. Typically, the market value of insurers is between three and five times the embedded value.

If investors agree with those calculations proposed by the government, LIC will join the league of India’s biggest companies – Reliance Industries Ltd and Tata Consultancy Services Ltd – with market capitalizations of Rs 17 trillion and Rs 14.3 trillion, respectively.

A finance ministry spokesperson did not respond to calls on his mobile phone seeking comment, while LIC declined to comment.

Two people said the government could push its hopes up a bit. He said the final valuation would be decided on the basis of various parameters, including investor appetite, profitability outlook and trends in the industry.

The first-time share sale by the insurer is part of Prime Minister Narendra Modi’s efforts to shore up cash and rein in the widening budget deficit amid the pandemic. The government is planning to sell 5% to 10% of the company before the end of March.

A call on the amount of stake to be sold by a ministerial panel will be taken later this month before LIC files the draft prospectus with the markets regulator. At the valuation that the government wants, 5 per cent stake will fetch about Rs 750 billion.

This story has been published without modification in text from a wire agency feed. Only the title has been changed.