LIC IPO: Centre Weighing 5 per Cent Stake Sale, Says Report

New Delhi: The central government is mulling to sell about 5 per cent of the shares it holds in the Life Insurance Corporation (LIC) as it prepares to file papers for the country’s biggest initial public offering (IPO), Bloomberg said quoting sources familiar with the matter.

The Centre plans to offer 31.6 crore shares of the 632 crore shares it owns in the LIC. According to sources, no fresh stock will be issued. The draft prospectus is expected to be filed this week, they said.

According to a report in Bloomberg, deliberations are still ongoing and details could change.

The embedded value of the state insurer is estimated to be about Rs 5.4 lakh crore ($72 billion), the sources told Bloomberg.

The share price will be determined through a book-building process, one of the people said, while another person said the insurer’s board is likely to meet Friday to ratify the decision.

LIC officials didn’t immediately respond to requests for comment. A finance ministry spokesman in New Delhi was unavailable for comment.

The IPO of LIC is vital for the government to meet the lowered revenue estimates of Rs 78,000 crore for the ongoing fiscal year.

So far, the central government has raised about Rs 12,000 crore from Air India divestment and stake sale in other PSUs.

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. For almost two years, his administration has been preparing the IPO plan for LIC, which has almost $500 billion in assets.

A sharp reduction in the government’s asset-sale target for the financial year ending March 31 has sparked speculation that the state will be seeking less from the LIC IPO that was anticipated earlier. It had planned to raise about $5 billion to $13 billion, people familiar with the matter said earlier.

The central government also is planning to allow foreign investors to pick up stake in LIC. According to Sebi guidelines, foreign portfolio investors (FPI) are permitted to buy shares in a public offer.

FDI policy would have to be tweaked for FII/FPI investment in this IPO, as LIC is a corporation and not an insurance company.

Paytm, the operator of digital payments app, currently holds the record for the nation’s biggest IPO after raising $2.5 billion in a November listing.