The Indian government is looking forward to offloading its stake in its largest Insurer, Life Insurance Company (LIC). The government hopes to raise around ₹75,000 Crore by selling almost 5% of its stake from the LIC. The Initial public offering (IPO) is a 100% Offer for Sale (OFS) with 31.6 Crore equity shares, and no new fresh issues will be made. Currently, the government owns a 100% stake in the company.
What is an Initial Public Offering (IPO)?
An IPO is when a privately owned company or a company with 100% ownership first sells its share of stock to the public. In this case, GoI wholly owns the company but now wants to sell 5% of its ownership to the public. An IPO is an excellent way for a company to raise money and further use it to enhance its operations.
Why does the government want to sell LIC?
In the budget for 2021, Finance Minister Nirmala Sitharaman said that the IPO of LIC would be launched in the new financial year beginning 1st April. Also, not only LIC but the Indian government is pushing for divestment in many other publicly owned companies, including Bharat Petroleum Corporation Limited (BPCL), Shipping Corp, and Container Corp. First, the plan was to raise around 1.75 Lakh Crore from these disinvestments, but due to a lack of interest from investors, the government has missed three consecutive years of the given target.
The Policy has not been a complete failure as the government has managed to offload some major Public Sector Undertaking (PSUs), including the privatization of Air India and some other small PSUs.
Also, listing India’s largest company is not an easy task. According to UBS, a Swiss International banking firm, the Insurer currently holds more state and central securities than the Reserve Bank of India. The company is the largest Institutional investor in the company owning or having assets under management of a whopping ₹39.5 trillion on a standalone basis which is more than any Insurance company in the country. As per the listing, the company can be one of the biggest ever listed companies with almost a market capitalization of 8.6 Lakh Crore.
When will LIC get listed on the stock exchange?
After much delay, the government filed the Draft Red Herring Prospectus (DRHP), telling the investor about the financials, its past performance, and valuation. The face value of the equity share will be ₹10. Initially, the government planned to list the company in March this year after a delay of almost one year. Still, unfortunately, again, the situation does not look pleasant for the IPO, as all eyes are currently on the Russia-Ukraine conflict, disturbing foreign Investors all across the globe.
Finance Minister Nirmala Sitharaman shared how she would mind delaying the IPO again, given the current circumstance. As per ET now, she said, “Ideally, I’d like to go ahead with it because we’d planned it for some time based purely on Indian considerations. But if global considerations warrant that I need to look at it, I wouldn’t mind looking at it again.”