The government may sell just five per cent stake in state-owned Life Insurance Corporation of India, which could help it raise upwards of ₹50,000 crore.
Sources close to the development said the government is hoping to go ahead with the proposed disinvestment in LIC, and wants to list it by February next year.
However, instead of a 10 per cent disinvestment, it may consider a small stake sale, given the expectation of its high valuation. A formal plan is yet to be finalised and is still under discussion.
“This will depend on the valuation arrived at and the market conditions and investor appetite at the time. A straight listing process in the domestic bourses may be an easier exercise at present,” noted a person familiar with the development.
“Inter-ministerial discussions are on, and it is expected to be a key priority going ahead,” said the source, adding that the Finance Ministry will move necessary amendments to the LIC Act in the Winter Session of the Parliament.
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A Cabinet note has already been prepared for selling up to 25 per cent stake in the insurer, although this may be done gradually in stages.
Sources said it is hoped that the disinvestment in LIC will not be met with too much opposition, as the insurer will continue to retain its current character and functioning.
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“Other financial sector institutions such as banks and insurance companies have also been listed on the bourses in the past, and LIC listing should also be seen along those lines,” said the person, adding that only a small holding in the insurer will be divested as of now, which could be less than 10 per cent and that the exercise should not be seen as privatisation of the life insurer.
However, till now, only transactions advisors – Deloitte and SBI Capital Markets – have been appointed, while a large part of the process for listing is still pending. This is likely to be taken up on priority basis now.
The government had outlined plans to list LIC in the Union Budget 2020-21, along with a target of ₹2.1 lakh crore for proceeds from disinvestment.