Not 10%, But Govt Will Sell 25% Of LIC To Private Firms: Shocking Reason Why?

Not 10%, But Govt Will Sell 25% Of LIC To Private Firms: Shocking Reason Why?
Not 10%, But Govt Will Sell 25% Of LIC To Private Firms: Shocking Reason Why?

Following the tune of Atma Nirbhar Bharat, after BSLN, Air India, BPCL and other PSUs, now central is planning to seek the cabinet’s approval to sell a 25% stake in the nation’s largest life insurer as per the reports.

Privatization Of LIC

The proposal is put forward in hopes to seek resources to plug a widening budget gap during the testing times of pandemic.

Basically, the government is planning to amend the act of parliament which will help the state-run Life Insurance Corp. of India to prepare for the sale, as per the sources.

So far the details are not provided, but the launch of the initial public offering for LIC will depend on market conditions, and it is expected to be done in tranches.

According to the  Bloomberg News report, the government has picked Deloitte Touche Tohmatsu India Ltd. and SBI Capital Markets Ltd. to help Life Insurance Corp. of India prepare for an initial share sale. 

They are expecting that the selected advisers will help in evaluating the capital structure of India’s biggest insurer.

In addition to that, they will also aid the company in reworking its financial statement, according to a tender document issued in June.

Apart from this, the government will also move an amendment in parliament as part of the proposal, for an authorized capital of Rs 20,000 cr which will be divided into 20 billion shares.

Further, the ministerial panel is expected to set up for asset sales and will decide on the size of the public offering.

On the other hand, the cabinet will consider changes to the capital structure of the insurer, as per the sources.

How Does This Help?

According to the government’s plan, the stake sale in LIC through a public offering of shares will help them in bolstering its finances after the coronavirus pandemic stalled growth.

Which in turn threatens the fiscal deficit target of 3.5% of the gross domestic product set for the year ending March 2021.

So far, the administration has raised over Rs 5700 cr through asset sales in the fiscal year from April 1, with a set target of Rs 2.1 trillion.

According to Finance Minister Nirmala Sitharaman, going public for this insurer will help instill “discipline” and unlock value, as she said in her budget speech in February, without providing details or the timeline for the sale.

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