Government-owned insurance behemoth Life Insurance Corporation of India (LIC) is likely to become the country's biggest company by market capitalisation with an estimated valuation of Rs 8-10 lakh crore. With a Rs 30.5 lakh crore balance sheet as of FY19, even a 25 per cent stake sale by the government will mean a bumper listing.
"LIC is likely to become the country's biggest company by market capitalisation on the day of the listing given that it is the largest company in terms of assets under management (AUM)," Kajal Gandhi, Analyst, ICICI Direct said.
Finance Minister Nirmala Sitharaman in her budget speech said LIC will be listed as part of the government disinvestment initiative.
“Listing of companies on stock exchanges discipline a company and provides access to financial markets and unlocks its value. It also gives an opportunity for retail investors to participate in the wealth so created. The government now proposes to sell a part of its holding in LIC by way of Initial Public Offer,” said finance minister Nirmala Sitharaman in her budget speech.
It being an over 60-year-old company, assessing just on embedded value like other private sector players that have been around for about 20 or less years may not be only criteria. Assets under management and profits will also be the key determinants, Gandhi pointed out.
"Being a government-owned entity, it is likely to see valuation gap versus private players," Gandhi said, adding that at even 25-30 per cent of its AUM, the company can be valued at around Rs 8-10 lakh crore.
Even a 10 per cent dilution will be difficult for market to absorb in one go and the government may look at doing this in lots, she added.
A "highlight of the budget is the LIC IPO, which is akin to the Saudi Aramco listing for Indian capital markets, and will be IPO of the decade," Vijay Bhushan, President, Association of National Exchanges Members of India (ANMI) said.
The government proposes to sell a part of its holding in LIC through an initial public offer, Sitharaman said while presenting Budget 2020-21.
"Finance Minister Nirmala Sitharaman cleared the air about speculation to list India's biggest insurance group LIC on Indian bourses. The major reason is to meet the FY21 disinvestment target and access the primary market which would aid the government to raise amounts needed to fill the gap of fiscal deficit and unlock LIC's value," said Jimeet Modi, CEO of Samco Securities said.
Currently, the government owns the entire 100 per cent stake in LIC.
"The government will sell part of LIC through its listing on the stock market which is also a positive trigger for the market," Amit Gupta, CO-Founder and CEO, TradingBells.
Latest Business News
