The official added that the initial public offering (IPO) required scrutiny not only by the Securities and Exchange Board of India (SEBI) but also the Insurance Regulatory and Development Authority of India (Irdai) which had been headless for nearly seven months.

The government is unlikely to go public with a life insurance company (LIC) in the current fiscal year ending March 2022, as the valuation of the state-owned giant is taking more time than expected, and preparatory work is still far from complete. A senior official at one of the commercial bankers said there were still some issues to be addressed regarding the LIC’s valuation. Even after the evaluation, the official said, there are many regulatory processes that have ended.

The official added that the initial public offering (IPO) required scrutiny not only by the Securities and Exchange Board of India (SEBI) but also the Insurance Regulatory and Development Authority of India (Irdai) which had been headless for nearly seven months.

Another official said that valuation of LIC is a complex process because of its size, product mix, real estate assets and subsidiaries, profit-sharing structure, and volume of share sale based on valuation.

Given the number of regulatory actions to be met, the official said it would be difficult to meet the deadline for the fourth quarter of the current fiscal year in any way.

The government is counting on the inclusion of the LIC IPO and the strategic sale of BPCL to achieve the divestment target of Rs 1.75 crore. Recently, Finance Minister Nirmala Sitharaman spoke about divestment and said the government is progressing well. “Linking the different bureaucracy and departments with loose parties is time consuming, and that is what we are trying to speed up,” she said.

The Cabinet’s Committee on Economic Affairs (CCEA) in July gave its initial approval for the listing of LIC. The government has already appointed 10 dealer bankers for this deal. To facilitate the inclusion of the LIC, earlier this year the government introduced about 27 amendments to the Life Insurance Corporation Act 1956.

According to the amendment, the central government will hold at least 75 percent of the LIC during the first five years after the IPO, after which it will own at least 51 percent at all times five years after the listing.

The authorized share capital of the LIC shall be Rs 25,000 crore divided into 2,500 crore shares of Rs 10 each, as per the amended legislation. Up to 10 percent of LIC’s initial public offering volume will be reserved for policyholders.

In her 2021 budget letter, Sitharaman said the LIC IPO will be launched in the fiscal year beginning April 1. Currently, the government owns a 100% stake in LIC.

Once listed, LIC is likely to become one of the largest domestic companies by market capitalization with an estimated valuation of Rs 8-10 crore. The Investment and Public Asset Management Administration (DIPAM), which manages the government’s stakes in state-owned companies, has selected the Milliman Advisors actuarial firm to check the embedded value of the LIC to achieve the government’s divestment target.

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