The Centre may have to relook at the valuation of Life Insurance Corporation of India (LIC) for its initial public offering (IPO) if the listing is pushed beyond May, according to a report by the Business Standard quoting an official.
The news comes amid speculation that the government might rethink the timing of the LIC share sale due to the market volatility amid the ongoing Ukraine-Russia war.
LIC's embedded value, which is a measure of the consolidated shareholder's 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. Although the draft red herring prospectus (DRHP), filed on February 13, does not disclose the market valuation of LIC, as per industry standards it would be about three times the embedded value.
If the valuation changes, the government would be required to seek fresh approval from SEBI for the life insurer’s IPO.
The Centre had earlier planned the mega IPO of LIC in the second week of March but the market volatility due to the Russia-Ukraine war has delayed proceedings. If the listing gets pushed beyond May 12, fresh papers would have to be filed, with an updated valuation of the insurer. LIC had filed the draft red herring prospectus (DRHP) with Sebi on February 13, and the regulator had approved the same last week, the official told the publication.
The government has plans to sell 5 per cent of LIC's stake this month before the fiscal year ends on March 31. At a 5 per cent stake dilution, the LIC IPO would be the biggest ever in the history of the Indian stock market and once listed LIC's market valuation would be comparable to top companies like RIL and TCS.
The offering is seen as critical to the government's plan to raise funds for budgeted spending. The government was expecting to garner over Rs 60,000 crore by selling about 31.6 crore shares in the life insurance firm to meet the curtailed disinvestment target of Rs 78,000 crore in the current fiscal year.
In case the share sale does not happen by March, the government will miss the revised disinvestment target by a wide margin.
(With inputs from agencies)
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