Money & Banking

Centre begins work on LIC disinvestment; may target IPO by next fiscal

Surabhi | | Updated on: Mar 03, 2020
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The Centre has begun work on the mega initial public offering of state-owned Life Insurance Corporation (LIC) of India.

Sources close to the development told BusinessLine that the government is keen to list LIC by the third quarter of the next fiscal year, if not closer to Diwali.

The idea is to ensure there is enough time left even after the proposed deadline so that in the event of delays, the listing can take place by the end of next fiscal year. “Discussions on the IPO have already started in the Finance Ministry and with LIC. The two big issues are on the amendments to the LIC Act, 1965, and valuation,” the source said.

The government may try and move amendments to the LIC Act by the Monsoon Session of Parliament, if not earlier, they added.

Finance Minister Nirmala Sitharaman had in Union Budget 2020-21 announced plans to list LIC. “Listing of companies on stock exchanges discipline a company and provides access to financial markets and unlocks its value. It also gives opportunity for retail investors to participate in the wealth so created,” she had said.

Economic Affairs Secretary Atanu Chakraborty had later said that it would take 8-9 months to prepare accounts and do the required legal tweaking before an IPO of the life insurer could be launched but it would be done before March 31, 2021.

Legal bottlenecks

There have already been concerns about whether the listing would be possible before the close of the next fiscal year.

In a recent note, Fitch Ratings had said that while the IPO would improve accountability and transparency at LIC, procedural and legal bottlenecks to amend certain sections of the LIC Act, conducting independent valuations and obtaining regulatory approval could delay the listing beyond the March 2021 target.

The listing of LIC is also essential for the Centre to meet its disinvestment proceeds target, which it has pegged at a record ₹2.1 lakh crore next fiscal year.

While there has been opposition to the proposed listing by the employees of LIC, sources said it is hoped that they too will realise the inherent benefits of the exercise.

There is likely to be a reserved portion of shares for LIC employees in the proposed IPO.

LIC Chairman MR Kumar had last month said that the listing would not impact customers and employees of the state-owned life insurer in any way and had stressed it would not be akin to privatisation.

Published on March 03, 2020

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