LIC's proposed IPO, IDBI stake sale to fetch govt over Rs90,000 cr
03 February 2020
The government aims to raise over Rs90,000 crore (around $12.5 billion) from a public listing of state-owned insurance behemoth Life Insurance Corporation (LIC) on the stock exchange and stake dilution in IDBI Bank, in the coming financial year.
Presenting the Union Budget 2020-21 in Parliament on Saturday, finance minister Nirmala Sitharaman proposed to list LIC on the stock exchange through an initial public offer (IPO), which will help the government raise around Rs70,000 crore to finance infrastructure investments.
Listing of LIC will bring in greater transparency, public participation and also deepen the equity market, said Rajiv Kumar, adding that the IPO is likely in the second half of FY21.
LIC is the country's largest insurer, controlling more than 70 per cent of the market share. Kumar said the IPO could be 10 per cent of LIC’s share capital, but added that decision has been taken so far.
There are a number of processes which have to be followed for the listing and some legislative changes would also be required for the listing of LIC, Kumar said.
"We will follow the extant procedure for listing and for other things including the legislative changes it requires in consultation with the ministry of law and that process we already started ... listing in the second half of FY21 seems logical," he said.
The government aims to garner R90,000 crore from the listing of LIC and stake dilution in IDBI Bank in the next fiscal out of total disinvestment target of Rs2,10,000 crore.
The government currently owns 100 per cent in LIC, while it holds around a 46.5 per cent stake in IDBI Bank.
"Listing of companies on stock exchanges discipline a company and provides access to financial markets and unlocks its value. It also gives 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 (IPO)," the finance minister had said in her Budget speech.
LIC has many subsidiaries, including IDBI Bank. It acquired controlling stake in IDBI Bank last year.
IDBI Bank has been weighed down by poor asset quality with its gross non-performing assets standing at 29.4 per cent in the quarter ended 30September 2019, when it also posted a loss of Rs3,459 crore.