LIC IPO Will Be Postponed Beyond 2022? Govt Forced To Issue Clarifications (Updated)

The secretary of DIPAM Tuhin Kanta Pandey has responded to media reports that the LIC IPO is unlikely to happen this fiscal.

He tweeted that the reports are false and that the plan “is on course” for the “last quarter of this fiscal”.

Why The Possible Delay?

Rumors were swirling that the IPO could be delayed to 2022 since the process of valuation of LIC is taking up more time than anticipated and that preparatory work is still incomplete.

The valuation process is a complex one due to LIC’s size, product mix, real estate assets, subsidiaries and profitability sharing structure.

Pending Problems

The size of share sale is dependent on the valuation.

DIPAM has appointed actuarial firm Milliman Advisors to determine the embedded value of LIC for meeting the government’s disinvestment target.

A senior official of a merchant banker was quoted as saying that there are “still some issues that need to be addressed with regard to the valuation of LIC”.

Incomplete Progress

He explained that the IPO has to be vetted not just by Securities and Exchange Board of India (SEBI) but also Insurance Regulatory and Development Authority of India (IRDAI) which has been “headless for almost 7 months”.

It would be difficult to meet the deadline of the current financial year ending March 2022 due to the number of regulatory procedures that have to be fulfilled.

Govt Sets The Record Straight

The government has refuted these statements and said that the IPO will take place in the January-March quarter of 2021-22.

It is counting on the LIC listing and strategic sale of Bharat Petroleum Corporation Limited (BPCL) to meet its disinvestment target of ? 1.75 lakh crore.

It will hold at least 75% in LIC for the first 5 years after the IPO, which will reduce to 51% thereafter.

Once listed, LIC will likely become one of the biggest domestic companies by market capitalisation with an estimated valuation of Rs 8-10 lakh crore.