The government has proposed to significantly increase the authorised capital of Life Insurance Corporation of India (LIC) to Rs 25,000 crore to facilitate its listing slated for the next fiscal.
The paid-up capital of the state-run insurer with over 29 crore policies stands at Rs 100 crore. Starting with an initial capital of Rs 5 crore in 1956, LIC today has an asset base of Rs 31,96,214.81 crore.
The authorised share capital of LIC shall be Rs 25,000 crore divided into 2,500 crore shares of Rs 10 each, as per the amendments proposed in the Life Insurance Corporation Act, 1956.
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The amendments proposed as part of the Finance Bill 2021 will lead to the setting up of a board with independent directors in line with listing obligations.
According to one of the 27 proposed amendments, the government will hold at least 75 per cent in LIC for the first five years after the public issue, and subsequently hold at least 51 per cent at all times after five years of listing.
Up to 10 per cent of the IPO issue size would be reserved for policyholders, according to Minister of State for Finance Anurag Thakur. The government will remain the majority shareholder and will continue to retain management control, safeguarding the interest of policyholders, he says.
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Finance Minister Nirmala Sitharaman’s Budget Speech 2021 says that the initial public offering (IPO) of LIC would be floated in the next financial year, beginning April 1.
The government owns 100 per cent stake in LIC now. 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.
The Department of Investment and Public Asset Management (DIPAM), which manages the government’s equity in state-owned companies, has signed up actuarial firm Milliman Advisors for ascertaining the embedded value of LIC for meeting the government’s Rs 1.75-lakh-crore disinvestment target. Deloitte and SBI Caps have been appointed as pre-IPO transaction advisors.
Of the Rs 1.75 lakh crore, Rs 1 lakh crore is to come from selling government stake in public sector banks and financial institutions, and Rs 75,000 crore would come as CPSE disinvestment receipts.
