Govt eyes over Rs 14 lakh crore valuation for LIC in IPO

NEW DELHI: The government is eyeing a valuation of over Rs 13 lakh crore to Rs 14 lakh crore for state-run Life Insurance Corporation of India (LIC). Although a final decision has not been sealed yet.
While several numbers are floating in the market in the run-up to the country's largest public issue, it is learnt that the government will be seeking a higher market value, while leaving some upside on the table for investors, especially those from the retail segment.In a first, a part of the public offer will be earmarked for the company's policyholders as the government seeks to democratise the shareholding.
The draft red herring prospectus (DRHP) for the IPO is expected to be filed over the next two days and the government may look to sell a 4-5% stake, according to feedback from market sources.
Sources had pointed out that the embedded value of the insurance behemoth could be more than Rs 5 lakh crore. The embedded value is a measure of the consolidated value of shareholder's interest in an insurance firm. The sources had pointed out that the market value could be three-four times the embedded value.

Over the last two months, LIC agents have been reaching out to policyholders, asking them to open depository accounts, informing them that they will be eligible to get shares at a preferential price. The corporation has also been reaching out to shareholders asking them to update their PAN numbers against policies on its website. This will enable the company to verify whether the applicants are policyholders or not. Converting a large chunk of policyholders would also enable the government to liberalise the surplus distribution policy in future. Currently, the surplus is distributed in the ratio of 95:5 between policyholders and shareholders, although the law allows a 90:10 ratio. The mega IPO for LIC, which is a household name in the country, is keenly awaited by investors and financial markets. Dipam secretary Tuhin Kanta Pandey had told TOI in his post-Budget interview that the government would unveil the size of the LIC IPO within a week.