The government is considering the option for an overseas listing of Life Insurance Corporation (LIC), India's largest insurer, in what many believe will be a powerful signal to global investors. The government has already announced its intent for an initial public offer (IPO) by the insurance giant, while also amending the Companies Act to allow Indian companies to directly list on foreign bourses.
Following the budget announcement, the government has appointed Deloitte and SBI Capital Markets as transaction advisors for the LIC issue, while also initiating the process to amend the LIC Act as the Centre is the sole shareholder under the law. The LIC is in the process of appointing an actuarial firm to arrive at the corporation’s embedded value - a valuation measure used by life companies to determine the present value of earning that will continue to flow in the future from policies that have already been sold.
Sources said that the enabling amendments are expected to be moved during the winter session of Parliament with the IPO likely earliest in the fourth quarter. Despite the amendments, the insurer will continue to be governed by the LIC Act, a source indicated.
Govt has to dilute 25% stake in LIC
Given the valuation, which will be in excess of £110-120 billion, a large issue within the country may not find sufficient buyers, making an international listing as an attractive proposition. While the government has to dilute a 25% stake in the company, the initial issue will be of a smaller size.
Initially, the proposal for a foreign listing was made internally within the government but has also found supporters outside. Some of the global stock exchanges have already made a pitch to the government to list the much-anticipated issue on these bourses but a final call has not been taken so far.
“It (an overseas listing) is under consideration but that decision will be taken later based on advice that the government gets from its advisors,” said a government source.
