LIC listing seen challenging in FY22 too

positive for LIC for bringing in better governance in the entity.”>Listing of LIC, which has a presences in every nook and corner of the country,will likely be hugely positive for LIC for bringing in better governance in the entity.

While investors are looking forward to the proposed listing of Life Insurance Corporation (LIC) in FY22, the government may still be racing against time to complete all the relevant processes, including restating the insurer’s finances in an investor-friendly manner, sources told FE.
LIC listing, originally 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 revenue of Rs 2.1 lakh crore in FY21.

If the LIC IPO doesn’t take place, the disinvestment target of Rs 1.75 lakh crore in FY22 could also be missed by a huge margin.

The government has budgeted Rs 1 lakh crore from disinvestment of government stakes in public sector financial institutions and banks in FY22.
After the transition of LIC into Companies Act is completed, the IPO preparation may take at least six
months before the offer hits the market.

Besides the pandemic, the insurer has massive land parcels and buildings across the country, including at prime locations of most major cities of the country.

While these assets are now estimated at notional book value, capturing their current market values, which often would be several hundred times more, could boost the insurer’s overall valuation.

LIC has the lion’s share in India’s insurance business with close to 70% first-year life insurance premia fetched by it, thanks partly to the comfort of sovereign guarantee.

In end-December, the government has appointed Milliman Advisors India as the reporting actuary for determining the embedded value of LIC.
SBI Capital Markets and Deloitte Touche Tohmatsu India were 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, department of investment and public asset management secretary Tuhin Kanta Pandey had told FE that the LIC IPO could hit market by Q4FY22.

While actual timing of listing will be known closer to Q3FY22, the IPO size will likely be in the range of 5-10%, depending on the market appetite at the time of the offer.

While the valuation of the insurer — which often plays White Knight to the government, will be known closer to the listing, it is believed to be worth Rs 8-11.5 lakh crore, meaning a 10% IPO could fetch the government anything between Rs 80,000-100,000 crore.

Private valuation firm RBSA Advisors recently estimated LIC’s worth to be between Rs 9.9-11.5 lakh crore.

Listing of LIC, which has a presences in every nook and corner of the country,will likely be hugely positive for LIC for bringing in better governance in the entity.

In FY21 budget speech on February 1, finance minister Nirmala Sitharaman said: “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”.