Bigger Than The Biggest?
According to an industry expert, if LIC were listed on the stock exchange, it would become India’s largest company by market capitalization, surpassing Reliance Industries and Tata Consultancy Services.
On Saturday, Finance Minister Nirmala Sitharaman said India’s Life Insurance Corporation (LIC) would be listed on the stock exchange as part of the government’s divestment initiative. Buoyed by the listing of LIC and the privatization of Air India, BPCL, and other public organizations, the government has set a divestment target of Rs 2.1 lakh crore for FY21.
In his budget speech, Nirmala Sitharaman said the government was proposing to sell part of its stake in LIC through an IPO. But the percentage was not revealed by the minister.
Currently, the government owns 100% of the shares of insurance giant LIC, a major investor in stock sales, including public company IPOs. In April last year, LIC acquired a majority stake in state-owned lender IDBI Bank, making it a private sector bank.
The 60-year-old state-owned LIC is the country’s largest insurer, controlling more than 70% of the market. The insurer is given a market share of 76.28% on several policies and 71% on first-year premiums.
“The current IPO is stepped one in creating long-term shareholder value for LIC,” “This issue is that the right side gave the capital marketplace environment and cannot crowd out the capital and monetary resources. The size should provide huge demand and after-sales performance.”
The IPO, originally scheduled for March, was delayed due to unfavorable market conditions following Russia’s invasion of Ukraine.
The size, along with the valuation of the issue, has been reduced – the government is diluting 3.5% of its stake against the previously expected 5%. The price range was set at Rs 902-949 per share, valuing the company at around Rs 6 lakh crore, up from Rs 13 lakh crore in March.
According to an industry expert, if LIC were listed on the stock exchange, it would become India’s largest company by market capitalization, surpassing Reliance Industries (RIL) and Tata Consultancy Services (TCS). Given LIC’s low equity base, the proposed IPO will generate a massive premium for the public purse.
“LIC will probably become the biggest company by capitalization on the day of listing. It is the largest managed company by assets under management (AUM),” said Kajal Gandhi, an analyst at ICICI Direct.
LIC Chairman Mr. Kumar said the company had linked almost 65 million PAN numbers to policies, but demand from these investors cannot be predicted as it is not known how many of them have accounts. Demat.
LIC is a government-owned entity, so it’s far probable to look at a valuation hole compared to non-public players. Even at 25-30% of its AUM, the company can be valued at around Rs 8-10 lakh. 10% will be difficult for the market to absorb all at once, and the government might consider doing it in batches”.
With a market capitalization of Rs 8.77 lakh crore, RIL, led by Mukesh Ambani, is the most valued company, followed by TCS with Rs 8.12 lakh crore as of February 1, 2020.
LIC’s balance sheet is quite strong except for asset quality. LIC’s total assets under management topped Rs 30 lakh crore for the first time in fiscal 2019 at Rs 31.11 lakh crore, up 9.38% year-on-year. According to audited figures for the financial year 2019, its market value was pegged at Rs 28.74 lakh crore at the end of March 2019, up by 8.61%. The total income of LIC, which includes unlimited income and investment income, was around Rs 560,784 crore in 2018-2019, an increase of 7.10%.