The Finance Ministry will discuss with market regulator Sebi to exempt LIC from the minimum public shareholding norm, DIPAM Secretary Tuhin Kanta Pandey said on Friday.
Under the Sebi’s minimum public shareholding norms, listed entities with a valuation of over one lakh crore need to have at least 25 per cent public shareholding within 5 years of listing.
The government had last year exempted public sector entities from this norm.
The government is selling over 22.13 crore shares in LIC at a price band of Rs 902-949 apiece in the initial public offering, which opens on May 4 and closes on May 9. LIC would start trading on stock exchanges on May 17.
The government expects to raise around Rs 21,000 crore from LIC IPO, which values the state-owned insurer at Rs 6 lakh crore.
Briefing reporters ahead of mega LIC IPO, Pandey said the government will not dilute its stake in Life Insurance Corporation within one year of listing.
“Going forward the roadmap for a very large player like LIC we will have to discuss with Sebi and Department of Economic Affairs for a right kind of roadmap for minimum public shareholding. We know it’s not easy. Even 5 per cent at this point of time would not be acceptable to the market,” Pandey said.
As per the Securities and Exchange Board of India (SEBI) norms, companies with a valuation of over Rs 1 lakh crore have to sell a minimum 5 per cent stake in IPO.
However, LIC has been exempted from this guideline.
“We had to seek special Sebi dispensation for relaxation for 3.5 per cent 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 crowding out effect,” Pandey added.
Speaking at the event, Financial Services Secretary Sanjay Malhotra said that the embedded value of new companies is small, and they have larger growth potential.
The EV growth potential is less for older companies like LIC, he said while clarifying the perceived low valuation of the country’s largest insurer.
LIC’s embedded value, which is a measure of the consolidated shareholders’ value in an insurance company, was pegged at about Rs 5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors.
Based on investor feedback, the market value of government-owned LIC has been pegged at 1.1 times its embedded value or Rs 6 lakh crore.
“norms are not there for exceptional cases like LIC. Despite a huge reduction to 3.5 per cent (from 5 per cent), it (IPO) is still the largest. Norms take care of only the normal. LIC is not normal,” Malhotra said.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.