Budget 2022: LIC IPO Expected Shortly, Says Nirmala Sitharaman as Disinvestment Target Looms

Union Finance Minister Nirmala Sitharaman on Tuesday announced in Budget Speech 2022 that Life Insurance Corporation (LIC) mega public offer is “expected shortly”.

Nirmala Sitharaman had, days before Budget 2022 presentation, reviewed the progress of the initial public offering (IPO) of LIC in a meeting with top officials of the ministry. The government had also recently extended the tenure of LIC chairman MR Kumar by one more year with a view to facilitate smooth listing of the insurance behemoth. Kumar will reportedly continue as chairman of LIC till March 2023.

The government owns a 100% stake in LIC. Once listed, it is likely to become the country’s biggest company by market capitalisation with an estimated valuation of Rs 8-10 lakh crore.

LIC IPO is crucial for meeting the Rs 1.75-lakh crore disinvestment target set for the current financial year ended March 2022. So far this fiscal, Rs 9,330 crore has been mopped up through PSU disinvestment.

The Narendra Modi government had, in September last year, appointed 10 merchant bankers, including Goldman Sachs (India) Securities Pvt Ltd, Citigroup Global Markets India Pvt Ltd and Nomura Financial Advisory and Securities (India) Pvt Ltd to manage the mega initial public offering of the country’s largest insurer LIC.

Other selected bankers include SBI Capital Market Ltd, JM Financial Ltd, Axis Capital Ltd, BofA Securities, JPMorgan India Pvt Ltd, ICICI Securities Ltd, and Kotak Mahindra Capital Co Ltd. Cyril Amarchand Mangaldas had been appointed as legal advisor for the IPO.

The government is in the process of deciding the quantum of government stake that will be divested through the IPO. The government is also mulling allowing foreign investors to pick up stakes in the country’s largest insurer LIC.

According to SEBI rules, foreign portfolio investors (FPI) are permitted to buy shares in a public offer. However, since the LIC Act has no provision for foreign investments, there is a need to align the proposed LIC IPO with Sebi norms regarding foreign investor participation.

The Cabinet Committee on Economic Affairs had in July last year cleared disinvestment of LIC.

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