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LIC IPO: Govt may sell stake in two stages to avoid crowding out pvt cos

LIC IPO: Govt may sell stake in two stages to avoid crowding out pvt cos

The government is likely to sell 5-6 per cent stake in LIC through the IPO, and a similar stake through a follow-on public offering.

While the insurer's valuation exercise is ongoing, it is estimated that the company would be valued at about Rs 12-15 lakh crore. While the insurer's valuation exercise is ongoing, it is estimated that the company would be valued at about Rs 12-15 lakh crore.

The Centre may decide to sell its stake in Life Insurance Corporation (LIC) in two stages to avoid crowding out private companies from the equity market.
 
The government plans to sell 10 per cent of its stake in LIC through initial public offering (IPO). However, it is likely to sell 5-6 per cent stake through the IPO, and a similar stake through a follow-on public offering (FPO), Mint reported citing sources.
 
While the insurer's valuation exercise is ongoing, it is estimated that the company would be valued at about Rs 12-15 lakh crore. A 10 per cent stake sale would translate to an initial offering of Rs 1.2-1.5 lakh crore, which the government fears will crowd out private companies from the equity market, hampering economic growth, the publication said.
 
"A final call on the size of the LIC IPO has not been taken as yet. Meeting the disinvestment target is not the sole consideration for the government. It will also consider the impact of the IPO on the economy as a whole before finalizing its size," an official was quoted as saying. The official added that the IPO will likely hit the market at the end of December quarter or in March quarter next year.

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Another source said it will be prudent for the government to sell its stake in the insurer in stages. "It can command a significant premium in the follow-on public offer next year. It can continue to dilute its stake in small proportions in the next five years to meet the regulatory requirement and command premium every time," the source said.
 
Preparations are on full swing for the IPO of LIC. Last week, the government invited bids from merchant bankers and legal advisors for the proposed mega IPO. Earlier this month, the Union Cabinet approved the IPO. The modalities such as issue size, pricing and timing would be decided by a panel headed by Finance Minister Nirmala Sitharaman.
 
The Centre has budgeted Rs 1.75 lakh crore from stake sale in public sector companies and financial institutions in 2021-22, including the LIC IPO.