Mumbai: The government moves forward on its plans to register for the life of the Corporation (LIC) in the current fiscal despite uncertainty after the weak performance of the initial Mega (IPO) public offerings such as paytm, and star health in the insurance sector.
Downtrend in the stock market following the new Covid variant detection also has not prevented the government because the benefits of macro IPO look bigger than challenges.
According to sources, insurance companies have conducted a foundation in connection with the design of the red herring prospectus and the results are half an year for the current financial year.
Actuaris Consultants, Milliman Advisors, are expected to formally submit their reports later this month.
Bankers have held an initial meeting with potential investors for the fourth quarter IPO.
Successful LIC IPO will support rupees, help contain a fiscal deficit and will be seen in positive light by the rating agency.
The source says that the success of the IPO will depend on getting the right price.
One indication that the government will advance with the IPO is that the Department of Investment and Management of Public Assets (Depam) this week appointed PR companies for the IPO process.
For investors, interesting problems are the multiples of the embedded value that the government will search.
They also want to know if there is a road map to increase the distribution of surplus to shareholders.
Although the law was changed to enable LIC to distribute 10% of surplusus to shareholders, the government, through a letter issued in November 2013, allowing the corporation to continue distribution 95: 5.
Industrial officials said that even if LIC continued with the surplus distribution ratio 95: 5, 5% dividends are enough to provide substantial results.
For example, at FY21, the corporation has a surplus assessment of Rs 57,780 Crore on the life funds of RS 34.4 lakh crore.
From this, dividends distributed at a 5% level work to Rs 2,889 Crore.
SBI Life Insurance, which is the closest proxy for the public sector life company, has a dividend result of 0.2% and RS market capitalization 1,14,845 crore.
The government is set at LIC IPO in Q4 despite market misery
