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LIC valuation delay may push IPO plan beyond FY22 but government confident of issue this fiscal | Bad news for common people waiting for LIC’s IPO, delay in valuation may happen

LIC IPO

Highlights

  • Company valuation is not yet complete
  • The government has already amended the LIC Act
  • Minimum 75 percent stake in the first five years with the government

New Delhi. Public sector insurer Life Insurance Corporation of India (LIC)’s initial public offering (IPO) is unlikely to come out in the current financial year as valuations took longer than expected. A senior official of a merchant banker, who is involved in the preparations for the IPO, says that the work of valuation of this huge public company is not yet complete and it may take some more time. Even after the valuation is done, it will take time to complete many regulatory processes related to the issuance.

DIPAM, the department that looks after the government’s stake in state-owned companies, has assigned the task of valuation of LIC to Milliman Advisors. Meanwhile, Secretary, Department of Investment and Asset Management (DIPAM) Tuhin Kant Pandey exuded confidence that the IPO of LIC will be brought in the quarter of January-March 2022. In one of his tweets on Sunday, he said that the procedural preparations related to the IPO are going well.

Contrary to this government claim, the merchant banker’s official says that before bringing an IPO, the permission of the market regulator Securities and Exchange Board of India (SEBI) will have to be taken. Apart from this, permission will also have to be taken from the Insurance Regulation and Development Authority of India (IRDAI), the regulatory body of the insurance sector.

It is worth noting that the post of IRDAI chief has been lying vacant for almost seven months. According to this official, in such a situation, the possibility of LIC’s IPO coming in the financial year 2021-22 is very less. There are only three months left in the financial year. The evaluation of LIC is a very complicated process in itself. This is because the size of LIC is very large and its product structure is also mixed. Apart from having real estate assets, it also has several ancillary units.

Another official said that even the size of the share sale of the public company cannot be decided until the valuation work is completed. The government is trying to bring LIC’s IPO in the current financial year itself. In fact, this IPO can play a very important role in achieving the disinvestment target of Rs 1.75 lakh crore this fiscal. Apart from this, the government also has high hopes from the strategic sale of BPCL.

Recently, Union Finance Minister Nirmala Sitharaman had said that the government is moving well in the direction of disinvestment. He had said that it takes time to rectify the shortcomings of the bureaucracy and various departments, but the government is trying to speed it up. The government has already amended the LIC Act for the listing of LIC. Under the new provisions, the government will continue to hold a minimum 75 per cent stake in LIC for the first five years of listing. But after that this limit will come down to 51 percent.

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