LIC IPO Will Create India’s 2nd Biggest Company After Reliance: Rs 15 Lakh Cr Valuation!

Life Insurance Corp. of India or LIC is set to become India’s second biggest company after its IPO pegs its valuation at Rs 15 lakh crore ($203 billion).

Final Report To Determine Value

The IPO is touted to be India’s biggest public offering.

However, a final report on the firm’s estimated worth is still awaited.

The embedded value of the company will likely exceed Rs 4 lakh crore, and its market value could be 4x that amount.

Once the final report is in, the valuation the government is seeking could change.

Embedded Value

Embedded value is a significant metric for insurers which combines the current value of future profits with the net value of assets.

The figure will be part of its IPO prospectus likely to be filed in the week starting Jan. 31.

Generally, the market value of insurers is between 3-5x the embedded value.

Joining Reliance And TCS

If investors agree with those calculations proposed by the government, LIC would become the country’s second largest company after Reliance Industries Ltd., with Tata Consultancy Services Ltd in the third position.

Reliance and TCS have a market capitalization of Rs 17 lakh crore and Rs 14.3 lakh crore, respectively.

Some insiders have said that the government’s expectations may be too high.

Significance To The Government

The final valuation will ultimately take into account various parameters, including investor appetite, profitability outlook, and trends in the industry.

The IPO is critical to the government in its efforts to meet its Rs 1.75-lakh-crore divestment target and trim a budget deficit that’s widened during the pandemic.

It is planning to sell 5% to 10% of the company before the end of March.

Drumming Up Public Response

The final call on the amount of stake to be sold will be taken by a ministerial panel later this month before LIC files the draft prospectus with SEBI.

The government is seeking a valuation of about Rs 15 lakh crore ($203 billion), meaning that a 5% stake will fetch about Rs 75,000 crore.

In the meanwhile, the company has been going all in on its marketing efforts to drum up a huge response, by way of adjusting capital-markets rules, sending phone messages and publishing newspaper advertisements, etc.