Why not a simultaneous overseas listing of LIC?

KS Badri Narayanan | Updated on October 09, 2020 Published on October 09, 2020

Will draw a diversified capital pool, ensure greater visibility and build brand image for itself and India

So, the Government is gearing for the mega public issue in the primary market — of Life Insurance of Corporation of India. After Finance Minister Nirmala Sitharaman’s announcement in the 2020-21 Budget that the government will sell a part of its holding in LIC, the buzz has only been growing.

The Department of Investment and Public Asset Management (DIPAM), which oversees disinvestments, had in June invited applications from prospective advisors. Going by media reports, the Centre has selected Deloitte Touché Tohmatsu India LLP, the consulting advisory arm of Deloitte in India, and Edelweiss Financial Services to advise it on pre-IPO plans. They will advise the Government on the timing of the IPO, prepare restated consolidated financial statements for the past three years for LIC and its subsidiaries, and identify the right way to structure the transaction after arriving at an optimal capital structure.

February listing?

The Centre is said to be looking at a listing by February. The Government may sell 5 per cent and even that could help it raise over ₹50,000 crore, making it easily one of the country's biggest companies by market capitalisation with an estimated valuation of over ₹10-lakh crore.

Only Reliance Industries, having a market capitalisation of around ₹15-lakh crore, and TCS (₹10 lakh crore) are in the elite club. The insurance behemoth can easily occupy the top slot in terms of market capitalisation, if the Government were to sell just a little more in the IPO.

While this all very well, have the investment advisors, instead of restricting LIC to the domestic market (that is, BSE/NSE listing), considered a simultaneous listing in global markets, especially in the US.

Already, Parliament has amended the Companies Act to make overseas listing easy. If LIC is allowed to list in the US, it will not just ensure greater visibility for its shares but also open doors to global investors looking for good bets in India. That it will also ensure more transparency and discipline in the functioning of LIC will be a bonus.

Accounting Standards

There are different models (direct listing, depository route or overseas listing) for international listing, DIPAM can ask the pre-IPO advisors to work on this front too.

Besides, LIC will need to prepare financial statements in accordance with global standards. Indian firms prepare financial statements in accordance with the Indian Accounting Standards, or the Indian Generally Accepted Accounting Principles, for local listing, but for overseas jurisdictions, companies are required to follow the locally applicable accounting standards.

For instance, for a US listing, LIC will have to prepare financial statements in accordance with the US Generally Accepted Accounting Principles, the famousUS GAAP. Most other exchanges, including the EU, London, Australia, and Singapore, accept International Financial Reporting Standards (IFRS).

May enter global index

Overseas listing may even find LIC a place in global indices such as MSCI Global, S&P Dow Jones and FTSE Russell. At the time of Saudi Aramco’s listing, S&P Dow Jones had said it would consider the oil giant big enough for fast-track inclusion into its global benchmark indices, based on the minimum float-adjusted market capitalisation of $2 billion.

Besides , helping LIC access diversified pools of capital and thus create better valuations, an overseas listing will also boost its, and India's, brand globally.

LIC would appeal to global institutions thanks to its fundamentals. The insurance major’s net premium income stood at ₹3.37-lakh crore and reported a net profit of ₹2,688.50 crore for FY20; At the end of FY20, its equity investments stood over ₹9-lakh crore.

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Published on October 09, 2020
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