What is your view on the LIC IPO? Do you see the IPO happening this year or is it likely to get postponed to the next financial year?

The big IPO of LIC may now get postponed to the next fiscal year, although the government is trying hard to push it through in the current fiscal year. With nearly 6 months lost in COVID related issues, it may be a tall task to complete all the formalities by March.

It therefore looks very likely that the LIC IPO may eventually spill over to the next fiscal year 2021-22. There are just about just about 5 months left for this fiscal year to end and there is still a lot of statutory and market related preparations for an issue of that magnitude.

Needless to say, the government was counting on LIC divestment to meet half of its ambitious disinvestment target of Rs.210,000 crore for FY21. That would mean the government would once again fall short of the divestment targets in this fiscal.

However, the government appears to be right in its observation that it would not be prudent to jump into an IPO of this size without getting an independent actuarial valuation for LIC. The government feels that would be a more reliable metrics for the IPO.

The IPO process will have to begin with statutory amendments to the LIC Act. Since LIC is a corporation formed under statute of Parliament, there will have to be parliamentary approvals taken. Modifications pertain to dividend payments and asset allocation.

There could also be changes in the quantum sold. Originally, government was only planning to sell 10%, but not it may look to sell more than that. In fact, some reports even peg the government selling up to 25% in LIC as part of the IPO offer for sale.

Valuations become paramount because, apart from the insurance business where LIC is the leader, it also has subsidiaries in banking and housing finance. In addition, LIC also sits on a rich portfolio of real estate assets and the methodology for the same needs to be finalized.