Modi Govt in Talks to Launch LIC's IPO This Year: Report
The government has identified the Life Insurance Corporation (LIC) of India, country's largest insurer, as a potential candidate for divestment in the current fiscal year, according to a report in The Indian Express.
The proposal, if implemented, will give the government’s divestment programme a major boost. Nirmala Sitharaman in the Union Budget 2019 had increased the divestment target to Rs 1.05 trillion for the current fiscal year from Rs 90,000 crore in the previous year.
According to the report, the LIC divestment proposal is in the early stage and has been discussed within the government. The plan is to first sell a small stake in LIC through an initial public offering (IPO) and then later dilute the government’s holdings further, the report added.
However, the government will have to amend the LIC Act of 1956 first before launching the insurer’s IPO. The government has so far not considered listing LIC due to its perceived role in supporting the equity markets in times of major sell-offs. LIC also buys shares of state-owned companies during divestment, especially when investor participation is seen weak. LIC realised a profit of Rs 23,621 crore from its equity investment during 2018-19 as against Rs 25,646 crore in the previous year. It also made a gross equity investment of Rs 68,621 crore during 2018-19.
LIC also has huge investments in debentures and bonds (Rs 434,959 crore), besides providing funding for many infrastructure projects (Rs 376,097 crore as of March 2018), according to the insurer’s annual report for 2017-18.
Public listing of LIC will lead to more disclosures of such investments and loan portfolios and, thereby, can help in more transparency and better governance. LIC is currently under the supervisory oversight of the Insurance Regulatory and Development Authority of India (IRDAI), but it is governed by the LIC Act of 1956, which enables the insurer to obtain a special dispensation in several areas including higher stakes in companies beyond the limit set by IRDAI.