Friday, May 13, 2022

LIC embedded value finalised, says DIPAM Secretary

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  • Investors have been waiting for the government to indicate LIC’s embedded value
  • The DIPAM Secretary had said at a press conference after the presentation of the Budget 2022-23 that the draft prospectus for LIC IPO can be expected within a week

New Delhi: State-run Life Insurance Corporation’s (LIC) embedded value has been finalised at more than Rs 5 lakh crore, Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey has said. According to a report by Reuters, Pandey told the wire agency in an interview, “I would say the embedded value could be more than 5 trillion rupees and the enterprise value will be multiples of that.” Media reports have projected LIC’s market valuation at around four times the embedded value.

IPO: Why LIC embedded value matters?

Investors have been waiting for the government to indicate LIC’s embedded value, which is a measure of future cash flows in life insurance companies and the key financial gauge for insurers. The embedded value will be revealed officially when the government releases the initial public offering (IPO) draft prospectus. The DIPAM Secretary had said at a press conference after the presentation of the Budget 2022-23 that the draft prospectus for LIC IPO can be expected within a week.

The embedded value will help in determining the market valuation of LIC and how much money the government raises in the IPO. 

LIC IPO

LIC has a majority share of the life insurance market in India and the planned IPO is touted to be the largest issue in India. The IPO is crucial for the government to bridge its fiscal deficit for the year as far as possible. The government had set out a disinvestment target of Rs 1.75 lakh crore for FY22 but has said it will not be able to achieve the figure due to several big-ticket disinvestments facing delays due to the COVID-19 pandemic. 

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