LIC IPO: Govt to retain sovereign guarantee, likely to sell 10% stake

The Initial Public Offering (IPO) for Life Insurance Corporation (LIC) is likely to be launched in the second half of FY21, Finance Secretary Rajiv Kumar said on February 2.

The decision to launch the LIC IPO was introduced during the Budget speech on February 1 when Finance Minister Nirmala Sitharaman proposed to sell a part of government stake in the insurance giant.

As per Kumar, There are a number of processes which have to be followed and would also be required for the listing of LIC, .

"We will follow the extant procedure for listing and for other things including the legislative changes it requires in consultation with the Ministry of Law and that process we already started ... listing in the second half of FY21 seems logical," he said.

Some legislative changes need to be made before launching the IPO, Kumar told PTI.

Asked about the quantum of dilution, Kumar said, it could be 10 per cent but no decision has been taken so far.

Later speaking to media, the finance minister assuaged concerns of policyholders of any breach of sovereign guarantee as ownership stays with the government.

"We have only said an IPO. We have not given complete ownership to somebody," she said.

The government aims to garner Rs 90,000 crore from the listing of LIC and stake dilution in IDBI Bank in the next fiscal out of total disinvestment target of Rs 2.10 lakh crore.

The government currently owns 100 per cent in LIC, while it holds around 46.5 per cent stake in IDBI Bank.

"Listing of companies on stock exchanges disciplines a company and provides access to financial markets and unlocks its value. It also gives opportunity for retail investors to participate in the wealth so created. The government now proposes to sell a part of its holding in LIC by way of Initial Public Offer (IPO)," the Finance Minister had said in her Budget speech.

Market participants are quite bullish about LIC and said it could be "IPO of the decade" akin to the Saudi Aramco listing.

The 60-year-old state-owned firm, LIC, is the country's largest insurer, controlling more than 70 per cent of the market share. The insurer has a market share of 76.28 per cent in number of policies and 71 per cent in first-year premiums.

LIC has many subsidiaries including IDBI Bank. It acquired controlling stake in IDBI Bank in 2019.

(With PTI inputs)