LIC valuation delay expected to push IPO plan beyond FY22
The government is unlikely to propose the IPO of Life Insurance Corporation (LIC) in the current fiscal year ending March 2022, as the state-owned giant’s valuation takes longer than planned and the preparatory work is still far from being completed. Completed.
There are still some issues to be addressed regarding the valuation of the LIC, said a senior official at one of the investment bankers.
Even after the assessment, several regulatory processes were concluded, the official said.
However, DIPAM Secretary Tuhin Kanta Pandey later expressed in a tweet his confidence that LIC’s IPO plans were on track and that this would occur in the January to March 2021-2022 quarter. .
It is reiterated that the plan is on track for the IPO in the last quarter of this fiscal year, Pandey tweeted.
The investment banker added that the initial public offering (IPO) requires approval not only from the Securities and Exchange Board of India (Sebi) but also from the Insurance Regulatory and Development Authority of India (Irdai) which is without head for almost seven months.
The valuation of LIC is a complex process due to its size, product line, real estate assets, subsidiaries and profit sharing structure, and the size of the share sale depends on assessment, said another official.
Given the number of regulatory procedures to be completed, the official said it would be difficult to meet the deadline for the fourth quarter of the current fiscal year by any stretch of the imagination.
The government is banking on the listing of the IPO of LIC and the strategic sale of BPCL to achieve its divestment target of Rs 1.75 lakh crore.
Recently, speaking of divestment, Finance Minister Nirmala Sitharaman said the government was making good progress.
“Settling the details between the bureaucracy and the different departments consumes its own time and that is what we are trying to speed up,” she said.
The Cabinet Committee on Economic Affairs (CCEA) had given its agreement in principle for the listing of the LIC in July. The government has already appointed 10 investment bankers for the transaction.
To facilitate the registration of LICs, the government earlier this year made about 27 amendments to the 1956 Life Insurance Company Act.
According to the amendment, the central government will own at least 75 percent of LIC for the first five years after the IPO, and then hold at least 51 percent at any time after five years from listing.
The authorized share capital of LIC will be Rs 25,000 crore divided into Rs 2,500 crore of shares of Rs 10 each, in accordance with the amended legislation. Up to 10 percent of the issue size of LIC’s IPO would be reserved for policyholders.
In his 2021 budget speech, Sitharaman said that LIC’s IPO would launch in the fiscal year starting April 1. Currently, the government owns 100% of LIC’s shares.
Once listed, LIC is likely to become one of the largest domestic companies in terms of market capitalization with an estimated valuation of Rs 8-10 lakh crore.
The Department of Investment and Public Asset Management (DIPAM), which manages government equity in state-owned enterprises, selected actuarial firm Milliman Advisors to determine LIC’s intrinsic value to achieve the goal. government divestment.
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