Centre seeks Rs 8-10 lakh crore valuation in LIC's mega IPO

By Suvashree Ghosh and Vrishti Beniwal,

India is seeking a valuation of between Rs 8 lakh crore ($109 billion) and Rs 10 lakh crore for state-backed Life Insurance Corp. in what’s slated to be the nation’s biggest initial public offering.

The government is considering selling a 5%-10% stake in the company, which could raise between Rs 40,000 crore and Rs 1 lakh crore, according to people with knowledge of the matter, who asked not to be identified as the matter is private.

The potential valuation is based on preliminary talks and may change after further discussions, due diligence and an official valuation report, the people said. A spokesperson for the finance ministry declined to comment. LIC didn’t immediately respond to an email seeking comment.

Also read: LIC IPO may impact jobs, social spending, Union warns

The valuation is much lower than Jefferies’ estimate of Rs 19 lakh crore but in line with others including RBSA Advisors’ of about Rs 10 lakh crore to Rs 11.6 lakh crore.

Prime Minister Narendra Modi’s government is pushing ahead with LIC’s IPO to help plug a widening budget gap as it aims to raise Rs 1.75 lakh crore by March through divestments. The LIC sale is key to the government achieving this target. India may also allow foreign direct investment in the insurer to ensure diversified and strong demand across investors.

‘Mother of all IPOs’

The sale could be “the mother of all IPOs so far in India,” said Jyoti Roy, deputy vice president at Angel Broking. Although there will be appetite, the sale is likely to be at the end of the financial year, meaning it could “drain liquidity and impact the secondary market to some extent,” he said.

Bankers met government and LIC officials last week to formally kick off the sale process. A listing is expected between January and March next year, Bloomberg has reported earlier.

The government selected 10 banks, including Kotak Mahindra Bank Ltd., Goldman Sachs Group Inc., JPMorgan Chase & Co. and ICICI Securities Ltd., to arrange the IPO. IFR reported the estimated valuation earlier Wednesday.

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