The government is planning to seek Cabinet approval to sell 25 percent stake in Life Insurance Corporation (LIC) of India, the country's largest life insurer, sources told Bloomberg. The report notes that to prepare for the sale, the Centre is looking to amend the Life Insurance Corporation (LIC) Act, 1956 under which the state-run company was set up.
The Finance Ministry is also seeking opinions from the inter-ministerial committee set up in February on six amendments to the LIC Act, including changes to the board of directors and capital structure, etc., a senior government official said, as per Mint.
A Cabinet note to this effect has been circulated and “Cabinet approval is expected in a month and after this the changes will be introduced in the Parliament for its approval," the source added.
Moneycontrol could not independently verify the report.
Earlier this year, Finance Minister Nirmala Sitharaman had announced in her budget speech that the government would divest its stake in LIC through an initial public offer (IPO). Currently, the government holds a 100 percent stake in the life insurer. Market conditions will determine the timing of the IPO, with the sale likely to be carried out in tranches.
The Narendra Modi government is hoping that the LIC IPO will help plug a burgeoning budgetary gap, which has further widened because in light of the coronavirus pandemic-led lockdown and its economic fallout.
Deloitte Touche Tohmatsu India Ltd and SBI Capital Markets Ltd have reportedly been picked to help during the preparation stage of the IPO, Bloomberg had reported in August. These advisors will help evaluate the capital structure for LIC as well as aid the company in reworking its financial statement.
An amendment seeking an authorised capital of Rs 20,000 crore, which will be divided into 20 billion shares, is also a part of the proposal,since the current provisions of the LIC Act prevent it from providing authorised capital, issued capital, etc, the Bloomberg report said. Accordingly, the management and board also will have to be restructured.