The government has proposed to significantly increase the authorised capital of Life Insurance Corporation of India (LIC) to Rs 25,000 crore to facilitate its listing slated for the next fiscal.
Currently, the paid-up capital of the life insurance company with over 29 crore policies is Rs 100 crore. Starting with an initial capital of Rs 5 crore in 1956, LIC has an asset base of Rs 31,96,214.81 crore.
The authorised share capital of LIC shall be Rs 25,000 crore divided into 2,500 crore shares of Rs 10 each, as per the amendments proposed in the Life Insurance Corporation Act, 1956.
The amendments proposed as part of Finance Bill 2021 will lead to the setting up of a board with independent directors in line with listing obligations.
According to one of the 27 proposed amendments, the central government will hold at least 75 per cent in LIC for the first five years post the IPO, and subsequently hold at least 51 per cent at all times after five years of the listing.
Up to 10 per cent of the LIC IPO issue size would be reserved for policyholders, Minister of State for Finance Anurag Thakur had said last month.
The government will remain the majority shareholder and will continue to retain management control, safeguarding the interest of policyholders, he had said.
In her Budget Speech 2021, Finance Minister Nirmala Sitharaman said the initial public offering (IPO) of LIC would be launched in the next financial year, beginning April 1.
Currently, the government owns 100 per cent stake in LIC. Once listed, it is likely to become the country’s biggest company by market capitalisation with an estimated valuation of Rs 8-10 lakh crore.
The Department of Investment and Public Asset Management (DIPAM), which manages the government’s equity in state-owned companies, has already selected actuarial firm Milliman Advisors for ascertaining the embedded value of LIC for meeting the government’s disinvestment target.
Deloitte and SBI Caps have been appointed as pre-IPO transaction advisors.
The Budget 2021-22 has set a disinvestment target of Rs 1.75 lakh crore, higher than the Rs 32,000 crore estimated to be garnered in the current fiscal.
Of the Rs 1.75 lakh crore, Rs 1 lakh crore is to come from selling government stake in public sector banks and financial institutions, and Rs 75,000 crore would come as CPSE disinvestment receipts.