You are here: Home » Companies » News
Business Standard

Govt seeks Rs 15-trn valuation for LIC in India's biggest IPO: Report

If investors agree with those calculations proposed by the government, LIC would join the league of India's biggest companies like RIL and TCS

Topics
LIC  | ipo filing | PSU shares

Vrishti Beniwal & Suvashree Ghosh | Bloomberg 

Photo: Bloomberg
Photo: Bloomberg

India is pushing for a valuation of about Rs 15 trillion ($203 billion) for a state-owned insurer that’s soon expected to file for the nation’s biggest initial public offering, people familiar with the matter said, even as arrangers awaited a final report on the firm’s estimated worth.

The so-called embedded value of Life Insurance Corp. of India is likely to be more than Rs 4 trillion, and its market value could be about four times that amount, the people said, asking not to be identified as the discussions are private. Once the final report is in, the valuation the government is seeking could change.

Embedded value, a key metric for insurers, combines the current value of future profits with the net value of assets. The gauge will be part of LIC’s IPO prospectus that’s likely to be filed in the week starting Jan. 31. Typically, the market value of insurers is between three and five times the embedded value.

If investors agree with those calculations proposed by the government, would join the league of India’s biggest -- Reliance Industries Ltd. and Tata Consultancy Services Ltd. -- which have a market capitalisation of Rs 17 trillion and Rs 14.3 trillion, respectively.

A finance ministry spokesman didn’t answer calls to his mobile phone seeking comment, while declined to comment.

The government may be stretching its expectations a bit too far, two of the people said. The final valuation would be decided based on various parameters, including investor appetite, profitability outlook, and trends in the industry, they said.

The first-time share sale by the insurer is part of Prime Minister Narendra Modi’s efforts to mop up cash and help rein in a budget deficit that’s widened in the midst of the pandemic. The government is planning to sell 5% to 10% of the company before the end of March.

A call on the amount of stake to be sold will be taken by a ministerial panel later this month before files the draft prospectus with the market regulator. At the valuation the government wants, a 5% stake will fetch about Rs 75,000 crore.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, January 12 2022. 13:09 IST
RECOMMENDED FOR YOU
.