The government is planning to sell 5% to 10% of the LIC before the end of March.
People familiar with the matter said India is pushing for a valuation of around 15 lakh crore ($203 billion) for a state-owned insurer. estimated value of the company.
The so-called embedded value of Life Insurance Corporation of India is likely to be more than Rs 4 lakh crore and its market value could be around 4 times that amount, the people said, claiming are not disclosed because the discussions are private. . Following the final report, the valuation the government is seeking may change.
Embedded value, an important metric for insurers, combines the present value of future profits with the net worth of assets. This metric will be part of the LIC’s IPO prospectus likely to be filed the week of January 31. Typically, the market value of insurers is 3 to 5 times the value. embedded.
If investors agree with the calculations proposed by the government, LIC will join a consortium of India’s largest companies – Reliance Industries Ltd. and Tata Consultancy Services Ltd. – has a market capitalization of Rs 17 lakh crore and Rs 14.3 lakh crore, respectively.
A Treasury Department spokesman did not return calls to his cell phone seeking comment, while the LIC declined to comment.
The two say the government may be stretching its expectations a little too far. They said the final valuation will be decided based on various parameters, including investor appetite, profitability prospects and industry trends.
The insurer’s initial stake sale is part of Prime Minister Narendra Modi’s efforts to raise cash and help contain a growing budget deficit amid the pandemic. The government is planning to sell 5% to 10% of the company’s shares before the end of March.
A call on the number of shares to be sold will be made by a ministerial panel later this month before the LIC submits a draft prospectus with the market regulator. At the valuation the government wants, a 5% stake would fetch around Rs 75,000 crore.
