Govt to take LIC public, sell part of its holding

New Delhi: The government plans to sell part of its holding in Life Insurance Corporation of India through an Initial Public Offering (IPO) as it set a record disinvestment target for 2020-21. "Listing on the stock exchanges disciplines the company, provides access to financial markets and unlocks value," Union Finance Minister Nirmala Sitharaman said in her Budget 2020 speech. "It also gives an opportunity to retail investors to take part in the wealth so created."

LIC, established in 1956 and fully owned by the government, is a financial behemoth with assets of more than Rs 36 lakh crore. A successful share sale will be crucial for the Narendra Modi administration as it plans to mop up Rs 2.1 lakh crore by selling stakes in public sector units in FY21. More so, after it estimates to miss its FY20 disinvestment target by more than a third. The plan to list LIC comes after the November 2017 IPOs of state-run General Insurance Corporation of India Limited and The New India Assurance Co. Limited.

There has been a very severe shortfall for the government in meeting its disinvestment targets this year, C Rangarajan, former Governor of the Reserve Bank of India, said. Therefore, by listing LIC, "they are taking the easy way out," he added.

India's largest insurer has been used as an investor of last resort in the past to support the markets by buying shares of state-owned peers and government bonds. LIC acquired significant stakes in the IPOs of Oil and Natural Gas Corporation Limited and Hindustan Aeronautics Limited in recent years, and bailed out struggling IDBI Bank Limited by buying a 51 percent stake last year.

The insurer, set up under the LIC Act of 1956, is regulated by the insurance Regulatory Development Authority of India. To take it public through an IPO, the government will have to amend the law. Finance Secretary Rajiv Kumar told reporters that the government expects about Rs 90,000 crore from the stake sale in LIC and IDBI Bank. Given that its holding in the lender is worth nearly Rs 18,000 crore at current prices, the government could fetch about Rs 72,000 crore from the LIC divestment.

Meanwhile, LIC employees' unions on Saturday opposed the Centre's plan, insisting that the move is "against the national interest".

With agency inputs