NEW DELHI: The government-owned life insurance behemoth – Life Insurance Corporation (LIC) of India – may not achieve the minimum 25% public shareholding target any time soon, the government hinted on Friday.
Tuhin Kanta Pandey, secretary, Department of Investment and Public Asset Management (DIPAM), told the media on Friday that the roadmap for 25% public shareholding can only be decided after having discussions with Securities and Exchange Board of India (Sebi) and Department of Economic Affairs (DEA), Ministry of Finance.
Sebi listing norms require listed companies to offer at least 25% shareholding to the public (other than the promoters). “To achieve 25% public shareholding for a large entity like LIC is not easy – even a 5% stake sale could unsettle the market,” said the DIPAM Secretary when asked about the roadmap for reaching the minimum 25% public shareholding in LIC.
Through the LIC Initial public offer (IPO), which is going to open for subscription from 4 May 2022, the government is diluting 3.5% of its stake in the public sector insurance behemoth. Around 22 crore shares would be on offer in the IPO, which is likely to garner Rs 21,000 crore for the government.
Initially, the government had planned to dilute 5% in LIC but owing to uncertain market conditions, the government revised its plan and decided to go ahead with only 3.5% equity dilution through the upcoming IPO. It has been disclosed in the red herring prospectus (RHP) of the IPO that no further sale of LIC’s shares would be undertaken for the next one year.
Meanwhile, responding to the criticism that the government is selling LIC’s shares at a lower valuation – 1.1 times the Embedded Value (EV) – compared to listed peers like SBI Life, HDFC Life and ICICI Prudential Life, Tuhin Kanta Pandey said that usually larger companies like LIC gets lower valuation than their smaller peers.
He said that the valuation of the company was decided based on inputs and feedback from analysts and prospective investors after the embedded value of LIC was disclosed to the public in February this year.