Government May Decide On LIC Public Offer's Timing This Week

Government is likely to take a call on the timing of LIC initial public offering (IPO) within this week, a senior official said.

The sale of 5 per cent stake or 31.6 crore shares in the country's largest insurer was originally planned for in March, but was postponed in view of the geopolitical tension.

The government has time till May 12 to launch the IPO without filing fresh papers with markets regulator Securities and Exchange Board of India (SEBI).

The official said it would be a tough call to decide whether to go ahead with the retail and domestic investor demand or to wait for geopolitical tension to ease and FIIs to return to market.

"A decision on timing the IPO would be taken this week," the official said.

LIC's embedded value, which is a measure of the consolidated shareholders' value in an insurance company, was pegged at about Rs 5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors.

There were estimates made in certain quarters that LIC's market valuation would be about 2-3 times its embedded value. The official said that for a company of the magnitude of LIC, such high multiplier to embedded value may not be correct.

The official further said the IPO price would have to be fixed in a way that on the listing day there is an upside to the stock and investors get rewarded.

“LIC is already a matured company and has seen business growth since its inception. The market valuation would have to be done keeping in mind its growth potential here-on,” the official added.

If the IPO is not launched now then it would have to be deferred till August or September since fresh papers with updated quarterly results and valuations would have to be filed with SEBI.

If the government decides to go ahead with the initial public offering by May 12 then the life insurer will have to file the red herring prospectus with SEBI by next week.

The official also said that under the present market condition the government is unlikely to offload more than 5 per cent stake in the life insurance behemoth. “When we are already facing headwinds, we cannot test waters with higher IPO size.” The finance ministry did not respond to the e-mail seeking comments for the story.

The government is planning to sell about 31.6 crore or 5 per cent stake in the life insurance behemoth.

LIC IPO would contribute a major chunk to the budgeted disinvestment proceeds in the current fiscal year. The government has pegged disinvestment receipts at Rs 65,000 crore for 2022-23, up from Rs 13,531 crore last fiscal year.