At ?15 Lakh Crore Valuation Through Biggest IPO, LIC Could Become India's 2nd Largest Company After Reliance

Day by day, the hype around LIC¡¯s IPO--slated to be India¡¯s biggest IPO yet--continues to grow.

Ever since the Finance Minister had announced the government's intended disinvestment in LIC during 2021¡¯s Budget speech, the finance ministry officials have maintained their stance on LIC becoming a listed entity before this financial year ends on March 31, 2022.

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Recent Happenings Surrounding LIC IPO

Last week, another news that boosted everyone¡¯s expectations that this IPO might well be rolled out as per the target timeline, was that LIC may file the draft IPO papers in January 2022 itself.

And now, according to those familiar with the matter, India is pushing for a valuation of around ?15 lakh crore for LIC.

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The Massive Valuation

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It¡¯s being believed that the so-called embedded value of LIC is likely to be more than four trillion rupees, while its market value could be about four times that amount.

For the uninitiated, the embedded value is a key metric for insurers, which combines the current value of future profits with the net value of assets. It will be a part of LIC¡¯s IPO prospectus that¡¯s likely to be filed this month itself.

Enroute To Become Second Largest Company

If things turn out as expected, LIC could join the league of India¡¯s biggest companies, and become the second-largest company, just below Reliance Industries Ltd. and just above Tata Consultancy Services Ltd., which have a market capitalization of about ?17 lakh crore and ?14.3 lakh crore, respectively.

Amongst the people who are familiar with the matter, two said that the government may be stretching its expectations a bit too far.

As per them, the final valuation would be decided based on various parameters, including investor appetite, profitability outlook, and trends in the industry.

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In Line With Government¡¯s Disinvestment Target

Through its stake sale in LIC, the government is aiming to divest 5%-10% equity in LIC, which will probably fetch them a whopping ? 80,000 crore-?1 lakh crore through this share sale.

Rest everything remains to be seen as and when the next set of steps are taken towards the draft IPO papers and subsequently the expected rollout of LIC in this financial year itself. Certainly, the entire nation¡¯s eyes must be keenly set on the biggest IPO.

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