According to certain reports, the state-run insurer LIC is seeking a valuation of Rs. 15 lakh crores. Upon this, LIC will become the second-largest company in India, just behind Reliance Industries Ltd. (RIL).
Further, this will bring TCS (Tata Consultancy Services) to third place, which is currently in the second position.
Keep reading to know more details on this topic.
LIC All Set to Join the List of India’s Biggest Companies
As per a report, LIC’s embedded value might be more than Rs. 4 lakh crores. This would result in a four times market value, i.e., around Rs. 15 lakh crores. Typically, the market value of insurance-providing firms is between 3-5% of the embedded value.
Life Insurance Corporation’s final value is based on different parameters, including investors’ appetite, profitability exposure, and market trends.
If investors are all in with the governments’ calculations regarding LIC, it will join the list of India’s biggest companies.
LIC IPO‘s success is extremely crucial to the government. As a result, it is employing newer methods to attract the public, including a change in FDI policy. As per the current Foreign Direct Investment Policy, the automatic route under the insurance sector allows a 74% FDI. However, this rule does not apply to LIC, which follows a different LIC Act. As per rules set by SEBI, both FDI and FPI are permissible under LIC’s public issue.
Government authorities are sending phone messages and printing newspaper ads to ensure the success of this public issue.
Know About LIC’s Public Offer
Through the LIC IPO, the government plans to divest 5% – 10% of its stake and seek a listing in NSE and BSE. The Government of India plans to mop up around Rs. 80,000 crores to Rs. 1 lakh crores through this public offer to protect the increasing budget deficit due to COVID 19.
Speculations point out that LIC IPO will hit the primary market by March 2022.
It was also reported that the LIC IPO prospectus is likely to be filed with SEBI during the last week of January 2022. After this, investors will be aware of the overall quantum of this IPO.
LIC’s debut in the primary market will bring in newer opportunities for retail investors and employees. Moreover, the firm may keep a reserved quota for LIC policyholders in its IPO.
The final report on LIC valuation is yet to be known. Further, a ministerial panel will decide on the amount of stake to divest in this IPO before LIC files its DRHP with the market regulator. However, at its current speculated valuation, a 5% stake would produce a whopping amount of Rs. 750 billion.
Source – India.com and Moneycontrol.
Frequently Asked Questions
What is the current valuation of RIL and TCS?
As of now, Reliance Industries Ltd.’s valuation stands at Rs. 17 lakh crores, while TYCS’ valuation is Rs. 14.3 lakh crores.
Does LIC operate internationally?
Yes, LIC has its international branch in the United Kingdom, Fiji, and Mauritius.
What is the government’s disinvestment plan for FY 2021-2022?
For FY 2021-2022, the government has planned a disinvestment target of Rs. 1.75 lakh crores.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.