LIC IPO unlikely to take place this financial year: Report

Given the number of regulatory procedures to be fulfilled, the government would unlikely to meet the deadline of the fourth quarter in the current financial year.

The Union government is unlikely to come up with the IPO of Life Insurance Corporation (LIC) in the current FY2021-2022, as there are some issues pertaining to the valuation of the company which is taking more time.

“Even after the valuation, there are several regulatory processes that the insurance behemoth had to pass. The initial public offering (IPO) requires vetting not only by the Securities and Exchange Board of India (SEBI) but also by the Insurance Regulatory and Development Authority (IRDA) that has been headless for almost seven months”, said a senior LIC official on condition of anonymity.

He further added that the valuation is a difficult process because of the size of the company, assets under management, subsidiaries and its profitability sharing structure, and the size of share sale that depends on its valuation. In July, the Cabinet Committee on Economic Affairs (CCEA) gave its in-principle approval for the listing of LIC. The government is banking upon LIC’s listing to meet its disinvestment target.

To list LIC, the government made about 27 amendments to the Life Insurance Corporation Act, 1956. One of the amendments states, that post IPO the government will hold a 75 per cent stake in LIC for the first five years and later hold at least a 51 per cent stake after five years of the listing.

Once listed the insurance behemoth is likely to become of the biggest companies in terms of market capitalisation with an estimated valuation of INR 8-10 lakh crore.

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