The IPO of Life Insurance Corporation of India (LIC), being dubbed the country's largest public offering, is likely to be postponed to the next financial year. According to a top official, before entering the stock market, the central government first wants to take stock of the independent actuarial valuation of the country's largest insurance company.
Before the IPO, the central government wants an independent evaluation of the company
Tuhin Kant Pandey, Secretary, Department of Investment and Public Asset Management (DIPAM), said that the work before the launch of LIC's IPO is going on in four phases. This includes the appointment of consultants, legislative amendments, changes in its internal software to provide a valuation based on LIC's assets, and appointment of actuators for the company's actuarial valuation. The government also wants to change the law under which LIC was established.
Pandey said, "Only after the completion of four phases will the final decision be taken on reducing the government's stake in LIC." Asked about the issue of IPO in this financial year, he said, only after the decision to reduce the stake, it will be agreed to bring the IPO and after that, it will be decided how much percentage of the IPO will be brought. We will try to complete these four phases in this financial year, but IPO is a big case and I think it will take time.
He said, Deloitte and SBI Caps have been appointed as LIC's pre-IPO consultants, which together with the company are preparing the compliance list. The second phase is followed by a legal amendment, for which the Department of Financial Services is working closely with DIPAM. The third phase is a change in LIC's internal software. DIPAM will bring an RFP for the appointment of an actuarial firm, which will independently verify the actuarial valuation of LIC.
The government's disinvestment target will be a shock
The stake sale in LIC is crucial to achieving a record disinvestment target of Rs 2.1 lakh crore for the current fiscal year ending on 31 March next year. Finance Minister Nirmala Sitharaman on behalf of the government had announced the sale of LIC stake through an IPO during the 2020-21 general budget. Now the disinvestment of the government can be stalled at Rs 1 lakh crore due to the postponement of LIC's IPO, which would be a shock for the government trying to raise less by disinvestment for development schemes.
This is the plan of LIC to sell its stake
The first preparation was to sell a 10 percent stake
Government gets Rs 1.10 lakh crore
Now plan to sell 25 percent stake
This will give the government up to Rs 2.5 lakh crore
The estimated price of LIC is Rs 11.5 lakh crore.