Govt moves Irdai to allow listing of 'corporation' ahead of LIC's IPO

This comes ahead of listing of LIC as India's largest IPO

The government has approached the insurance regulator to seek an exemption for listing of a ‘corporation’ as it prepares for Life Insurance Corporation of India’s (LIC) initial public offering (IPO), expected to be the largest offering in the country.

The Department of Investment and Public Asset Management (Dip­am) is in talks with the Insurance Reg­ulatory and Development Auth­ority of India (Irdai) to seek an exemption for the listing of an insurance ‘corporation’ on the exchanges, as LIC wo­uld be the first insurance corporation coming with an IPO, said an official.

Irdai’s current guidelines allow listing of insurance companies that are governed by the Companies Act on the exchanges, the official added. Although several changes were made in the LIC Act to align the insurer with the provisions of the Companies Act for its listing, it is still a corporation, he said. 

The markets regulator, Securities and Exchange Board of India (Sebi), allows listing of corporations, but an exemption will have to be sought from Irdai, he said.

The discussions have started as the government prepares for India’s largest IPO, which is expected to shore up government’s revenues in the pandemic-struck year. 

These approvals are being sought even before the embedded value of the insurer is derived, and the size of the IPO is decided, so that the IPO timeline is shortened. The government is planning to launch the IPO in the last quarter of the current fiscal year.

The consultations with the regulator are also taking place on how the insurer would tweak the distribution of its surplus to policyholders and shareholders, he added. Currently, LIC distributes 95 per cent of the surplus to the policyholders and the balance 5 per cent to the government.

“LIC will be careful while finalising the surplus distribution to protect the interest of its policyholders even as policyholders are being given a chance to be shareholders of LIC,” said the official. 

According to the changes made in the LIC Act, 10 per cent of issue size of the IPO will be reserved for its policyholders.

The discussions with Irdai also include how to operationalise segregation of participating and non-participating funds which has also been made in the LIC Act. Participating policyholders share profits of the participating fund of the insurer while non-participating policies' profits and dividends are not shared with policyholders.