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LIC’s valuation could be at least US$109bn

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India is seeking a valuation of between INR8tn ($109bn) and INR10tn for state-backed Life Insurance Corp in what is set to be the nation’s biggest initial public offering, reported Bloomberg.
The government is considering selling a 5%-10% stake in the insurer, which could raise between INR400bn and INR1tn, according to people with knowledge of the matter, who asked not to be identified as the matter is private.

The potential valuation is based on preliminary talks and may change after further discussions, due diligence and an official valuation report, the people said. A spokesperson for the Finance Ministry declined to comment.

The valuation is much lower than Jefferies’ estimate of INR19tn but in line with others including RBSA Advisors’ of about INR10tn to INR11.6tn.

India may also allow foreign direct investment in the insurer to ensure diversified and strong demand across investors. 

LIC’s IPO is expected to take place in the last quarter of the current financial year ending 31 March 2022. The insurer is India’s biggest life insurance company.

Surplus distribution

Meanwhile, the government is looking at ways to align LIC’s rules for surplus distribution to shareholders with the practice in private companies, reported The Times of India.

Currently, LIC, which is governed by a special law, is allowed to transfer 5% of its surplus to the shareholders’ fund. The remaining 95% goes to the policyholders’ fund for paying bonuses on eligible life insurance policies. For other life insurance companies, which are regulated through the Insurance Act, the permissible allocation is in the ratio of 90:10.

The government’s move on LIC’s surplus distribution is to make investment in LIC as attractive as that in the private sector.


 

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