The Finance Ministry will focus on with market regulator Sebi to exempt LIC from the minimal public shareholding norm, DIPAM Secretary Tuhin Kanta Pandey stated on Friday. Under the Sebi’s minimal public shareholding norms, listed entities with a valuation of over one lakh crore must have at the least 25 per cent public shareholding inside 5 years of itemizing.
The authorities had final yr exempted public sector entities from this norm. The authorities is promoting over 22.13 crore shares in LIC at a worth band of Rs 902-949 apiece within the preliminary public providing, which opens on May 4 and closes on May 9. LIC would begin buying and selling on inventory exchanges on May 17.
The authorities expects to lift round Rs 21,000 crore from LIC IPO, which values the state-owned insurer at Rs 6 lakh crore. Briefing reporters forward of mega LIC IPO, Pandey stated the federal government is not going to dilute its stake in Life Insurance Corporation inside one yr of itemizing.
“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 stated.
As per the Securities and Exchange Board of India (SEBI) norms, corporations with a valuation of over Rs 1 lakh crore should promote a minimal 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 on the occasion, Financial Services Secretary Sanjay Malhotra stated that the embedded worth of latest corporations is small, and so they have bigger progress potential. The EV progress potential is much less for older corporations like LIC, he stated whereas clarifying the perceived low valuation of the nation’s largest insurer.
LIC’s embedded worth, which is a measure of the consolidated shareholders’ worth in an insurance coverage firm, was pegged at about Rs 5.4 lakh crore as of September 30, 2021, by worldwide actuarial agency Milliman Advisors. Based on investor suggestions, the market worth of government-owned LIC has been pegged at 1.1 instances its embedded worth 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 stated.