“We are expecting that the regulatory nod should come by the first week of February. The price and percentage dilution will be worked out by the government,” said an executive aware of the developments.
Tuhin Kanta Pandey, secretary, Department of Investment and Public Asset Management (DIPAM), had earlier said that the government is hopeful that LIC’s DRHP will be filed by early February and the issue will come within this fiscal.
The embedded value will be conveyed to the regulator and since LIC is a Domestic Systemically Important Insurer (D-SII), it is already subjected to additional regulatory measures to deal with the systemic risks and moral hazard issues,” said the above quoted executive reasoning for the early clearance from IRDAI.
D-SIIs are perceived as insurers that are ‘too big or too important to fail’ (TBTF) and are subjected to enhanced regulatory supervision.
Earlier this month, industry secretary Anurag Jain had said that the government is making changes in the foreign direct investment (FDI) policy to facilitate disinvestment of the country’s largest insurer. “So, we would be coming out with a revised FDI policy which will facilitate LIC disinvestment,” he had said.
The LIC Act, which governs the insurer, does not mention foreign investment and also limits any shareholder other than the central government to a maximum 5% stake.
The government has shortlisted 10 merchant bankers, including Goldman Sachs Group Inc, JP Morgan Chase & Co and ICICI Securities to manage the LIC issue. Actuarial firm Milliman Advisors LLP India has been engaged for assessing the embedded value of LIC, while Deloitte and SBI Caps have been appointed as pre-IPO transaction advisors.
The Cabinet had in July last year approved the initial public offering of LIC and the stake sale is being planned in the ongoing quarter. Expected to be the biggest ever issue in the Indian market, it’s pegged at about ₹1 lakh crore.
