Feb 2, 2020

Govt to sell part of its holding in LIC through IPO

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Finance Minister Nirmala Sitharaman on Saturday proposed to sell a part of its holding in largest insurer LIC via initial public offer (IPO). She also proposed to sell the government’s remaining stake in IDBI Bank.

The government set a divestment target of Rs 2.1 lakh crore for FY21 compared with Rs 1.05 lakh crore target for the ongoing financial year. The target came far above analyst estimates of Rs 1 lakh crore.

The government has divested Rs 18,094.59 crore so far this year.

Amar Ambani of YES Securities said that the government divestment was based largely on the back of LIC IPO. It is much higher than our target of Rs 1.35 lakh crore, he said.

“Given that Sebi regulations need a minimum dilution of 10 per cent, it is unclear if there is enough liquidity for such a large sized IPO. Additionally, LIC has been a port of call for various PSU fund raises in the past. Given that LIC would be open to the public to invest, we understand that the government would also strengthen its governance policies especially when it comes to investments of its investable corpus,” said Aditya Cheriyan, Partner, Khaitan & Co.

Anil Rego, Founder & CEO, Right Horizons also feels that the the IPO will bring in transparency in LIC’s functioning.
Pavan Kumar Vijay, founder at Corporate Professional Group echoed the view.

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