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LIC: Government green-lights LIC public offer

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New Delhi: The government has cleared the decks for the initial public offering (IPO) of state-owned Life Insurance Corp (LIC) of India, likely to be the country‚Äôs biggest such share sale. The cabinet committee on economic affairs (CCEA) gave “in-principle approval” to the proposal at its meeting last week, a top government official told ET.
A group of ministers will take a final call on timing and the quantum of equity to be offloaded. The finance ministry is now expected to appoint merchant bankers for the offer.
The Department of Investment and Public Asset Management (DIPAM) has already appointed actuarial firm Milliman Advisors LLP India to assess the embedded value of the insurer. Deloitte and Caps have been appointed as pre-IPO transaction advisors.

Authorised Share Capital Increased
“It should happen in this fiscal, whether in the third quarter or fourth, that will depend on market conditions,” said another official aware of the matter. The government has budgeted Rs 1.75 lakh crore in the current fiscal from disinvestment receipts.
The government has said it will retain a majority stake and management control to protect the interest of policyholders. Up to 10% of the issue size will be reserved for LIC policyholders, the government had said earlier in response to a question in the Rajya Sabha.

In FY20, the surplus generated was Rs 53,954 crore, out of which Rs 51,257 crore was given to policyholders.
In preparation for the IPO, the authorised share capital of LIC has been increased to Rs 25,000 crore.
Further, the government has amended the Securities Contracts (Regulation) Rules, allowing companies that have a market capitalisation of more than Rs 1 lakh crore at the time of listing to sell only 5% of their shares against the earlier limit of 10%, a move intended to benefit the LIC stake sale.

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