Govt Wants Rs 8 Lakh Crore Valuation Of LIC Before Mega-IPO; 10% Govt Share To Be Sold

Considering India’s biggest initial public offering, the country is seeking a valuation of between 8 trillion rupees ($109 billion) and 10 trillion rupees for state-backed Life Insurance Corporation.

Valuation Of LIC’s Upcoming IPO

As we know that the government is considering selling a 5%-10% stake in the company.

According to the sources, the move is expected to raise between 400 billion rupees and 1 trillion rupees.  

The said potential valuation is based on preliminary talks. 

But it may change after further discussions, due diligence and an official valuation report, the people said. 

So far, the finance ministry has declined to comment and LIC also did not respond on the subject.

In reality, this valuation is much lower than Jefferies’ estimate of 19 trillion rupees. 

Although, it is in line with others including RBSA Advisors’ of about 10 trillion rupees to 11.6 trillion rupees.  

IPO To Help With Budget Gap

It seems that Prime Minister Narendra Modi’s government is pushing ahead with LIC’s IPO.

This initiative will help plug a widening budget gap as it aims to raise 1.75 trillion rupees by March through divestments. 

In simple words, the sale of LIC is the key to the government  achieving this target. 

Encouraging Diversification

The Indian Government may also allow foreign direct investment in the insurer.

So that they can ensure diversified and strong demand across investors. 

According to deputy vice president at Angel Broking, Jyoti Roy said, the sale could be “the mother of all IPOs so far in India,”. 

Expected Listing 

For the expected time, the sale is likely to be at the end of the financial year.

That means, it could “drain liquidity and impact the secondary market to some extent,” he added. 

In the same regard, last week, bankers met government and LIC officials to formally kick off the sale process. 

Reportedly, a listing is expected between January and March next year.  

So far, government has selected 10 banks, including Kotak Mahindra Bank Ltd., Goldman Sachs Group Inc., JPMorgan Chase & Co. and ICICI Securities Ltd., to arrange the IPO.