In what is slated to be India’s biggest initial public offering, the government is seeking a valuation of between 8 trillion rupees ($109 billion) and 10 trillion rupees for state-backed Life Insurance Corp by considering selling 5%-10% stake in the company. This could possibly raise between 400 billion rupees and 1 trillion rupees, according to sources with knowledge of the matter.
The potential valuation sought may change after further discussions as it is still based on preliminary talks. The valuation however is much lower than Jefferies’ estimate of 19 trillion
rupees but in line with others including RBSA Advisors’ of about 10 trillion rupees to 11.6 trillion rupees.
The government is pushing ahead with the insurer’s IPO to fill a widening budget gap as it aims to raise 1.75 trillion rupees by March through divestments. It may also allow foreign direct investments as the LIC sale is key to the government achieving this target and wants to ensure a diversified and strong demand across investors.
According to Jyoti Roy, deputy vice president at Angel Broking, the sale could be “the mother of all IPOs so far in India”. The sale is likely to be at the end of the financial year, meaning it could “drain liquidity and impact the secondary market to some extent,” he said.
Bankers met government and LIC officials last week to formally kick off the sale process, with a listing expected between January and March next year. The government selected 10 banks, including Kotak Mahindra Bank Ltd., Goldman Sachs Group Inc., JPMorgan Chase & Co. and ICICI Securities Ltd., to arrange the IPO.