July 30, 2021

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LIC Disinvestment: CCEA’s green signal for privatization of LIC, know what will happen next!

LIC Disinvestment: CCEA's green signal for privatization of LIC, know what will happen next!

Highlights:

  • The Union Cabinet has approved the disinvestment of Life Insurance Corporation (LIC).
  • A committee headed by the Finance Minister will decide the quantum of stake sale in LIC.
  • It is said to be the largest public issue in Indian corporate history.
  • The listing of LIC is important in view of the government’s disinvestment target for the current financial year.

New Delhi
LIC Disinvestment: The Union Cabinet has approved the disinvestment of the country’s largest insurance company Life Insurance Corporation (LIC). Giving this information on Monday, a senior official said that a committee headed by the Finance Minister will decide the quantum of stake sale in LIC. The Department of Investment and Public Asset Management (DIPAM) had appointed actuarial company Milliman Advisors LLP India to work out the underlying value of LIC ahead of its initial public offering (IPO). It is said to be the largest public issue in Indian corporate history.

Budget amendments to the LIC Act have been notified and the actuarial company will finalize the underlying value of the life insurance company. Under the underlying value, the present value of future profits of the insurance company will be included in its current net asset value. The Cabinet Committee on Economic Affairs (CCEA) last week approved the proposal for IPO of LIC, the official said. “The quantum of stake sale will be decided by the government through an alternate mechanism on disinvestment.”

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The official said that LIC’s IPO may come by the end of the current financial year. Up to 10 percent of the issue size of LIC IPO will be reserved for policyholders. The government has already made necessary legislative amendments to the LIC Act for the proposed IPO. Deloitte and SBI Caps have been appointed as pre-IPO deal advisors.

The listing of LIC is important in view of the government’s disinvestment target for the current financial year. The government has set a target of raising Rs 1.75 lakh crore from disinvestment in the current financial year. Of this Rs 1.75 lakh crore, Rs 1 lakh crore will be raised from the government’s stake sale in public sector banks and financial institutions. The remaining Rs 75,000 crore will come from disinvestment of Central Public Sector Undertakings.

 

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