New Delhi: Finance Minister Nirmala Sitharaman has said on Saturday that the government will go for disinvestment of part of its stake in LIC (Life Insurance Corporation) through IPO (initial public offering). The decision was announced by Sitharaman at the time of presenting the Union Budget 2020. The Centre currently holds 100 percent stake in LIC. LIC was identified as a candidate for a potential public listing by the Centre in July 2019. The move is part of the Centre’s PSU disinvestment and asset monetisation plan.
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LIC disinvestment via IPO is a big-bang announcement
LIC is India’s largest financial institution and if LIC shares are listed on stock exchanges, it could easily be India’s top listed company in terms of market valuation, overtaking current leaders Reliance Industries Ltd and Tata Consultancy Services.
In 2019, reports had said that the government was looking to sell a small tranche of its shareholding in LIC through an IPO. The IPO is likely to fetch a huge premium as LIC currently has a small equity base. The Centre had listed the shares of General Insurance Corporation and New India Assurance through IPOs three years ago.
LIC has been the government’s LIC behemoth
When it comes to PSU disinvestment, LIC has been ushered in by the Centre in the past enough number of times to have earned the moniker, the ‘white knight.’ This especially holds true under the Narendra Modi government because the bulk of the insurance company’s investments in the public sector have been done between 2014 and 2019.
Since its inception in September 1956, LIC has invested a total of Rs 22.6 lakh crore, showed the data released by the RBI in September 2019. Also, around 47 percent of LIC’s total investment in the public sector was done under the Narendra Modi regime because this government has relied on PSU disinvestment way more than other governments have done in the past to make up for revenue shortfalls. Around Rs 10.7 lakh crore was put in by LIC between fiscal years 2014-15 and 2018-19.
Govt will have to amend LIC Act first
The government will have to amend the LIC Act before making the insurance corporation public. LIC is under the supervisory oversight of the Insurance Regulatory Development Authority of India (IRDAI).