While investors are searching forward to the proposed listing of Life Insurance Corporation (LIC) in FY22, the government may well nevertheless be racing against time to comprehensive all the relevant processes, like restating the insurer’s finances in an investor-friendly manner, sources told FE.
LIC listing, initially planned for FY21, was later rescheduled to FY22.
Failure to execute the LIC IPO and BPCL strategic disinvestment resulted in the Centre garnering only Rs 32,835 crore or 16% of the budgetted (BE) disinvestment income of Rs 2.1 lakh crore in FY21.
If the LIC IPO does not take location, the disinvestment target of Rs 1.75 lakh crore in FY22 could also be missed by a large margin.
The government has budgeted Rs 1 lakh crore from disinvestment of government stakes in public sector economic institutions and banks in FY22.
After the transition of LIC into Companies Act is completed, the IPO preparation may well take at least six
months ahead of the supply hits the industry.
Besides the pandemic, the insurer has huge land parcels and buildings across the nation, like at prime places of most big cities of the nation.
While these assets are now estimated at notional book worth, capturing their present industry values, which normally would be various hundred occasions more, could increase the insurer’s all round valuation.
LIC has the lion’s share in India’s insurance coverage business enterprise with close to 70% very first-year life insurance coverage premia fetched by it, thanks partly to the comfort of sovereign assure.
In finish-December, the government has appointed Milliman Advisors India as the reporting actuary for figuring out the embedded worth of LIC.
SBI Capital Markets and Deloitte Touche Tohmatsu India had been appointed pre-IPO transaction advisors in August 2020.
In the Budget for FY22, the government brought in 27 amendments in the LIC Act to facilitate the listing.
Among other tweaks, the amendments will lead to restating books of accounts in compliance with the Companies Act.
In February, division of investment and public asset management secretary Tuhin Kanta Pandey had told FE that the LIC IPO could hit industry by Q4FY22.
While actual timing of listing will be recognized closer to Q3FY22, the IPO size will most likely be in the variety of 5-10%, based on the industry appetite at the time of the supply.
While the valuation of the insurer — which normally plays White Knight to the government, will be recognized closer to the listing, it is believed to be worth Rs 8-11.5 lakh crore, which means a 10% IPO could fetch the government something among Rs 80,000-one hundred,000 crore.
Private valuation firm RBSA Advisors not too long ago estimated LIC’s worth to be among Rs 9.9-11.5 lakh crore.
Listing of LIC, which has a presences in just about every nook and corner of the nation,will most likely be hugely positive for LIC for bringing in greater governance in the entity.
In FY21 spending budget speech on February 1, finance minister Nirmala Sitharaman stated: “Listing of companies on stock exchanges disciplines the company and provides access to financial markets and unlocks its value. It also gives an opportunity for retail investors to participate in the wealth so created”.