‘FinMin, Sebi to take call on LIC public holding norm’

NEW DELHI: The finance ministry will discuss with market regulator Securities and Exchange Board of India (Sebi) to exempt Life Insurance Corporation of India (LIC) from the minimum public shareholding norm, the secretary of the department of investment and public asset management, Tuhin Kanta Pandey, said on Friday.

Under the Sebi’s minimum public shareholding norms, listed entities with a valuation of more tan Rs1 lakh crore need to have at least 25% public shareholding within 5 years of listing. The government had last year exempted public sector entities from this norm.

The government is selling more than 22.13 crore shares in LIC at a price band of Rs902949 apiece in the initial public offering (IPO) that opens on May 4 and closes on May 9.

LIC would start trading on stock exchanges on May 17. It expects to raise around Rs21,000 crore from the IPO, which values the state-owned insurer at Rs6 lakh crore. The government will not dilute its stake in LIC within one year of listing, Pandey said.

“For a very large player such as LIC we will have to discuss with Sebi and the department of economic affairs for a right kind of roadmap for minimum public shareholding. We know it’s not easy. Even 5% at this point of time would not be acceptable to the market,” Pandey said.

Companies with a valuation of more than Rs1 lakh crore have to sell a minimum 5% stake in IPO, according to Sebi norms. However, LIC has been exempted from this.

“We had to seek special Sebi dispensation for relaxation for 3.5% stake dilution. The reason for this was a very large corporate was entering the arena. We also had to be mindful of how it impacts the capital market in general. There was a crowding out effect,” Pandey said.

The embedded value of new companies is small and they have larger growth potential, said financial services secretary Sanjay Malhotra.

The growth potential is less for older companies such as LIC, he said, clarifying the perceived low valuation of the country’s largest insurer.

LIC’s embedded value, a measure of the consolidated shareholders’ value in an insurance company, was pegged at about Rs5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors..