The government is unlikely to come up with the highly anticipated IPO (IPO) of Life Insurance Corporation (LIC) in the current fiscal year ending March 2022, as the valuation of the state-owned company is taking longer than expected, and preparatory work is far from finished.
There are still some issues to be addressed regarding LIC’s valuation, said a senior official for one of the investment bankers.
Even after the valuation, there are several regulatory processes that have been completed, the official said.
The official added that the initial public offering (IPO) is to be audited not only by the Securities and Exchange Board of India (SEBI), but also by the Insurance Regulatory and Development Authority of India (IRDAI), which has been headless for nearly seven months. state.
Valuation of LIC is a complex process due to its size, product mix, real estate assets, subsidiaries and profitability sharing structure, and the size of the share sale depends on the valuation, another official said.
Given the number of regulatory procedures that must be met, the official said with any imagination it would be difficult to meet the fourth-quarter deadline of the current budget.
The government is counting on the listing of LIC IPO and the strategic sale of Bharat Petroleum Corporation Limited (BPCL) to meet its divestment target of Rs 1.75 lakh crore.
Recently, Speaking on divestments, Finance Minister Nirmala Sitharaman said the government is making good progress.
“Fishing up loose ends between bureaucracy and different departments takes its own time and that’s what we’re trying to accelerate,” she had said.
In July, the Cabinet Committee on Economic Affairs (CCEA) gave its approval in principle for the listing of LIC. The government has already appointed 10 investment bankers for the transaction.
To facilitate the incorporation of LIC, the government made about 27 amendments to the Life Insurance Corporation Act 1956 earlier this year.
Under the amendment, the central government will have at least 75 percent in LIC for the first five years after the IPO and at least 51 percent at all times five years after the IPO.
The share capital of LIC will be Rs 25,000 crore divided into 2,500 crore shares of Rs 10 each, as per the amended legislation. Up to 10 percent of the size of the LIC IPO issuance would be reserved for policyholders.
In her 2021 budget speech, Ms Sitharaman had said that LIC’s IPO would be launched in the fiscal year beginning April 1, 2021. Currently, the government owns 100 percent of the shares in LIC.