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Govt to sell at least 5% stake in LIC IPO

Govt aims to collect at least ₹66,000 crore from the LIC IPO (Photo: Mint)

Draft share sale papers to be filed by next week, says top govt official

LIC share sale by March key for govt to meet its reduced asset-sales goal

The nation’s largest insurer came a step closer to going public, with the government confirming that it will file the draft share sale documents to sell at least 5% of Life Insurance Corp. of India (LIC) by next week.

In an interview, Tuhin Kanta Pandey, secretary of the department of investment and public asset management, said a minimum of 5% of LIC’s shares would be sold through the largest-ever initial public offering in India.

However, the actual number of shares will be specified in the share sale documents, he added.

“A minimum of 5% will have to be done. The final size will be decided depending on the number of shares, which is very large,” he said, adding that the documents will be filed by the end of next week.

The sale of the shares by the end of March is crucial for the government to meet its reduced asset-sales target of ₹78,000 crore—sharply lower than the ₹1.75 trillion budgeted last year—for this fiscal year.

A miss could further complicate the government’s budget maths.

Pandey said that the revised budget estimates for asset sales this year have been arrived at after considering the potential proceeds from LIC’s share sale.

The government’s revised disinvestment target implies that it expects to collect at least ₹60,000 crore from the public insurance company’s share sale.

“We’ve done ₹12,000 crore, including Air India’s ₹2,700 crore, so the main transaction left is LIC which will make up for the remaining… we can also exceed it (the target). It all depends on the size,” he added.

In November, Mint had reported that the embedded value of the state-run insurer is likely to be around ₹11 trillion, or about $150 billion.

Pandey said the central government would wait at least a year before it further dilutes its shares in the state-run insurance company.

“The number of tranches will depend on us because it is a very complicated issue of when one can go for a new FPO (follow on public offer) because the size is very large, the number of shares is also very large,” he said, adding that the government will have to wait for a year before bringing another tranche to the markets.

Pandey said that a portion of the issue would be reserved for anchor investors, in a similar way that has been done for other state-run companies such as Indian Railway Finance Corp. and RailTel Corp. of India, adding that the process will begin after the sale documents are filed with the markets regulator.

A portion of the shares is also likely to be reserved for employees.

Actuarial firm Milliman Advisors LLP India has worked out the embedded value of the state-run insurance company, while Deloitte and SBI Capital Markets Ltd have been hired as pre-share sale transaction advisers.

The central government has also named 10 investment bankers, including Goldman Sachs (India) Securities Pvt. Ltd, Citigroup Global Markets India Pvt. Ltd and Nomura Financial Advisory and Securities (India) Pvt. Ltd, to manage the mammoth share sale

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