LIC may become biggest firm by m-cap; valuation can hit Rs 10 trn: Experts

Insurance behemoth LIC is likely to become the country's biggest company by market capitalisation with an estimated valuation of Rs 8-10 lakh crore as market participants expect it to be the "IPO of the decade", akin to the Saudi Aramco listing.

Finance Minister Nirmala Sitharaman on Saturday said LIC will be listed as part of the government disinvestment initiative.

"LIC is likely to become the country's biggest company by market capitalisation on the day of the listing given that it is the largest company in terms of assets under management (AUM)," Kajal Gandhi, Analyst, ICICI Direct said.

It being an over 60-year-old company, assessing just on embedded value like other private sector players that have been around for about 20 or less years may not be only criteria. Assets under management and profits will also be the key determinants, Gandhi pointed out.

"Being a government-owned entity, it is likely to see valuation gap versus private players," Gandhi said, adding that at even 25-30 per cent of its AUM, the company can be valued at around Rs 8-10 lakh crore.

Even a 10 per cent dilution will be difficult for market to absorb in one go and the government may look at doing this in lots, she added.

A "highlight of the budget is the LIC IPO, which is akin to the Saudi Aramco listing for Indian capital markets, and will be IPO of the decade," Vijay Bhushan, President, Association of National Exchanges Members of India (ANMI) said.

Saudi Aramco, which is currently valued at USD 117.82 billion, was listed on Saudi Stock Exchange in December last year.

According to Krishna Kumar Karwa, Managing Director, Emkay Global Financial Services, the LIC IPO will be a big positive for corporate governance and transparency and will open up one more avenue for fund raising for the government over the years.

Metropolitan Stock Exchange, Interim CEO, Balu Nair said: "The LIC listing will be eagerly awaited by investors and will provide huge fillip to capital raising through the primary market." The government proposes to sell a part of its holding in LIC through an initial public offer, Sitharaman said while presenting Budget 2020-21.

"Finance Minister Nirmala Sitharaman cleared the air about speculation to list India's biggest insurance group LIC on Indian bourses. The major reason is to meet the FY21 disinvestment target and access the primary market which would aid the government to raise amounts needed to fill the gap of fiscal deficit and unlock LIC's value," said Jimeet Modi, CEO of Samco Securities said.

Further, listing of the company would discipline the it by adhering to various listing requirements. Also, this would give opportunities to retail investors to associate in the wealth creation of this company, he added.

"If we estimate the valuation of LIC to be around Rs 10 lakh crore, then a 5 per cent divestment would give the government Rs 50,000 crore funds which would help it narrow the fiscal deficit target gap," Modi said.

Currently, the government owns the entire 100 per cent stake in LIC.

"The government will sell part of LIC through its listing on the stock market which is also a positive trigger for the market," Amit Gupta, CO-Founder and CEO, TradingBells.

Jaideep Hansraj, MD and CEO of Kotak Securities said listing of LIC would help bridge a gap in the fiscal deficit for FY21.