NEW DELHI: Valuation concerns have not deterred the interest of investors in the initial public offer (IPO) of state-owned life insurer Life Insurance Corporation (LIC) of India, a senior finance ministry official said. “The interest shown by investors in the road shows for the LIC IPO has been immense. This is not a small issue (IPO), and investors know the importance of the company,” he said, rebutting the concerns over higher valuation of the offer. He said the pricing of the IPO would be discovered over time gauging the interest shown by investors during the road shows.
The government has been organising road shows wooing large global investors who have not yet shown interest in what is likely to be the biggest public share sale offer by any company in the country. The likely pricing of the LIC IPO has kept many large investors at bay as they feel the shares would be valued at a premium the company may not command.
The embedded value of LIC has been estimated at Rs 5.4 lakh crore, and based on the embedded value many analysts believe the IPO would be priced upwards of Rs 1,800, which according to them is very high. Some analysts have even said LIC might have to relook at its embedded value, which is allowed by the markets regulator.
They say return ratios of LIC are at sub-par with other listed private sector life insurers. The finance ministry official hinted the listing of the insurer may not fructify in the current financial year. The official said: “Given the situation (Ukraine-Russia crisis) and the market condition, we are hoping we could still manage to list it in March.”