Govt selling five percent shares of LIC, A Complete story

Ground Report | New Delhi: Govt selling LIC shares; Life Insurance Corporation of India LIC, known as the 'Mother of All Capital', has been exposed. LIC on Sunday submitted the draft of documents (DRHP) to capital markets regulator SEBI for bringing its IPO on the stock market.

According to this draft, the government will sell more than 316 crore equity shares of LIC. LIC wants to raise about Rs 63 thousand crore by selling five per cent shares.

The government holds 100% of the shares of LIC, so the shares will be allotted to the investors only through the offer of sale. The government aims to get LIC listed in the stock market by the end of this financial year.

The draft document will first get approval from SEBI. The document does not provide any information about the timing and value of IPOs on the stock exchanges. Earlier this month, when the Union Budget was presented, the government made a dramatic cut in the disinvestment estimate.

The disinvestment target was reduced from Rs 1.75 lakh crore to Rs 78,000 crore. Doubts are being raised about whether LIC's IPO will come by the end of March. This decision on LIC is indicating that the government wants to speed up the process of disinvestment.

Tuhin Kant Pandey, Secretary, Department of Investment and Public Asset Management, tweeted that the DRHP for the IPO of LIC has been filed with SEBI on Sunday.

According to the application filed, the embedded value of the company is $71.56 billion. The draft does not mention anything about the company's market valuation, but according to experts associated with the insurance industry, this embedded value could be three times i.e. Rs 16 lakh crore.

A portion of the IPO will be reserved for anchor investors. Also, 10% share will be safe for the insured. However, it is not yet known what discount the company will give to its policyholders and employees in buying shares.

In September last year, the government had appointed 10 merchant bankers to conduct the IPO of the country's largest insurance company LIC. These include Goldman Sachs, Citigroup and Nomura. At the same time, Cyril Amarchand Mangaldas has been named as legal advisor.

According to the English newspaper The Hindu, Tuhin Kant Pandey has said that as of 31 March 2021, LIC had 66% market share in new business premiums with 283 crore insurance and 10.35 lakh agents.

The Telegraph wrote, "Observers are also watching LIC's entry into the stock market in the mirror of Aramco. Aramco is a Saudi Arabian oil company and raised $29.4 billion by IPO at the end of 2019. It was the world's largest IPO." Incidentally, this Saudi company had transferred four per cent more shares to the sovereign fund, from which another $80 billion was raised.

It is being said about LIC that it will easily leave behind the amount of Rs 18,300 crore of digital payment app Paytm. However, sales of personal insurance were severely affected in 2020 due to the COVID pandemic.

In the year 1956, when the LIC Act was brought to nationalize the business activities related to life insurance in India, few people would have guessed that one-day LIC itself will come into the market.

In the year 2015, at the time of the IPO of Oil and Natural Gas Corporation Limited (ONGC), Life Insurance Corporation of India had invested $ 1.4 billion. After four years, when it came time to bail out the debt-ridden IDBI Bank, LIC once again opened its bag.

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