LIC IPO to launch in October — Government may reserve 10% portion for policyholders

The much-anticipated IPO of public sector insurer Life Insurance Corp of India (LIC) may well lend more sparkle to the Indian stock markets this Diwali.

Speaking to IANS, Disinvestment Secretary Tuhin Kanta Pandey noted the fact that LIC is a complex undertaking but the government is up to the challenge and will complete the market offering post October.

"It may happen after October... around Diwali," Pandey said in the interview.

He added that the government has already initiated its plan to clear all incumbrances on way of LIC IPO. In this regard, he said that the amendment required for the IPO has already been included as part of the Finance Bill, 2021 and will become effective once Parliament gives its nod to the Union Budget.

Presenting the Union Budget on Monday, Finance Minister Nirmala Sitharaman said that all the announced disinvestment proposals including the LIC IPO would be completed this fiscal. She had first made the mega announcement of the IPO in the last year's budget.

On the size of the LIC offer, Pandey said that the amount of shares to be offered in the initial public offering (IPO) would depend on the embedded value and the size. The valuation process is underway for the insurance giant.

"This is an institution in which people have trusted and we don't want to break their trust. We have even asked them to be the owners (shareholders)."

Pandey said that Amendment Act reserves 10 per cent of the total shares on the block for policy-holders.

Regarding the requirement of listed public sector companies to achieve minimum public shareholding of 25 per cent, he said that a new rule is in the making for large PSUs having high valuations.

A rule notified in 2018 had mandated every listed PSU, which has public shareholding below 25 per cent, to increase its public shareholding to at least 25 per cent, within a period of two years from the date of that notification -- August 3, 2018. The government has however extended the time period for compliance to the norm till August 2021.

Currently, the government totally owns LIC and its valuation is expected to be in the range of Rs 8-10 lakh crore.

Once LIC enters the stock market, it may be the largest IPO in Indian history, even if just 5 per cent of its paid-up equity capital is offered to the public.

The top five IPOs in India so far are Coal India, Reliance Power, General Insurance Corporation of India (GIC Re), ONGC and SBI Cards and Payment Services. Each of these have been in the vicinity of Rs 10,000 crore.

The Secretary for the Department of Investment and Public Asset Management (DIPAM) also said that the government's core focus in terms of disinvestment will be strategic sale and the major chunk of revenue from offer of shares on the stock markets, be it an IPO or offer for sale (OFS) would come from the LIC IPO.

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