The Union Cabinet gave a green signal to the divestment of India's largest Life Insurance Corporation (LIC) by approving the initial public offering (IPO). Formalities such as issue size, pricing, etc will be finalised by a committee headed by the finance minister.
With this approval, the Central government is likely to invite bids for merchant bankers in the next 14 days to carry further proceedings of LIC's disinvestment process, reported Deccan Herald.
Appointment Of Actuarial Firm
In January, the Department of Investment and Public Asset Management (DIPAM) had appointed Milliman Advisors LLP India, an actuarial firm (that helps in operation and profitability of insurance business), to assess the valuation of LIC, reported NDTV.
Reports state that the Budget amendments to the LIC Act have been notified. The actuarial firm may finalise the embedded value of the life insurer.
The company's present value of future profit is also added to its present NAV (net asset value).
"Last week, the government cleared the proposal of an initial public offering of LIC. The alternative mechanism on disinvestment will now decide on the number of stake to be divested," said an official, reported NDTV.
IPO By Financial Year End
According to the government, it is expected to come out with IPO by the end of the current financial year, and up to 10 per cent of the offering would be reserved for policyholders. The two pre-IPO transaction advisors appointed by the government are SBI Caps and Deloitte.
As it aims to collect ₹1.75 lakh crore in the current fiscal, the listing of LIC is crucial for the government to meet the disinvestment target.
Rs 1 Lakh Crore From Selling The Stake
The government wants to accumulate ₹1 lakh crore by selling the government's stakes in PSBs and financial institutions. The remaining ₹75,000 crore would come as CPSE (Central Public Sector Enterprises) disinvestment receipts.
So far in the current fiscal, the government has been able to retrieve ₹3,994 crore from the sale of SUUTI stake in Axis Bank. Besides, around ₹3,700 crore has come in from the share sale in NMDC (National Mineral Development Corporation).
During the budget in February 2021, the finance minister had said that the IPO of LIC would be started in 2021-22.