LIC to get listed on stock exchange
Finance minister Nirmala Sitharaman in the Budget 2020 has announced listing public sector behemoth Life Insurance Corporation of India on the bourses and privatising IDBI Bank.
The proceeds from LIC Initial Public Offering (IPO), IDBI stake sale along with current divestments in progress will help the government to achieve its aggressive disinvestment target of `2.1 lakh crore and fiscal deficit targets. However one needs clarity on the sovereign guarantee that comes with LIC policy.
According to insurance experts, based on a high level of evaluation of LIC’s embedded value (future value of the new business), the insurer’s market capitalisation could be `8 lakh crore to `10 lakh crore, thus more valuable than TCS and Reliance Industries. Listing of LIC would also require amendments to the LIC Act 1956.
“Listing of LIC is a commendable measure provided there is clarity on the sovereign guarantee to policyholders and adherence to the required solvency margin is undertaken. Based on a very high level of evaluation of the Embedded value of LIC’s portfolio, the market capitalisation of LIC could be `8 lakh crore to `10 lakh crore,” said Ashvin Parekh managing director at Ashvin Parekh managing director at Ashvin Parekh Advisory Services.
“After two capital infusions, the government owns a substantial part of IDBI Bank (46.5 per cent stake) which will be completely sold off. The new investors will seek...
Stiffer divestment target of `2.10 lakh crore, double of current fiscal year target of `1.05 lakh crore and higher than even last five years divestment receipts surprised everyone.
The government has not been able to achieve the target this year so far with just `18,095 crore collected so far and only 60 more days to go.
“A tall divestment target will be keenly monitored but signifies a big intent towards fiscal prudence,” said Sailesh Raj Bhan, deputy CIO — Equity Investments, Nippon India Mutual Fund.
But divestment department is confident with strategic sales of BPCL, Concor, Shipping Corporation of India, Air India, IDBI and LIC IPO coming. The ground work has already been done this year to reap rewards in the next fiscal year, Tuhin Kanta Pandey, secretary, Department of Investment and Public Asset Management said.
During the Current Financial Year 2019-20 so far `18,094.59 crore has been obtained through disinvestment transactions. As on March 31, 2019, the Government had realised `84,972.16 crore as disinvestment proceeds against the budget estimate of `80,000 crore during the financial year 2018-19.
Government is targeting `90,000 crore divestment receipt from financial entities including the initial public offering from LIC and sale of remaining stake in IDBI Bank. Some more PSU banks could see dilution of government stakes going forward after IDBI stake sale, experts said.
The debt-based exchange traded fund (ETF) recently floated by the government was a big success as it mopped up `12,400 crore.
“Government proposes to expand this by floating a new Debt-ETF consisting primarily of government securities,” the Union finance minister said.