Will involve retail investors in LIC IPO, says FM Nirmala Sitharaman

Move will benefit employees, policy holders and agents, says LIC chairman

On Friday, Union Finance minister Nirmala Sitharaman and Life Insurance Corporation Chairman MR Kumar sought to assuage concerns over the decision to list the government-owned insurer on stock exchanges.

Sitharaman had said in her recent Budget speech that the government would sell part of its 100 per cent holding in LIC through an IPO in the next fiscal year. The finance minister, who was in Mumbai on Friday, told mediapersons: “At the moment we are looking at an IPO (of LIC). And the IPO will in a way bring in retail investors into the picture and also make issue more transparent for everybody to have a look at what is happening.”  

Meanwhile, Kumar said there was no question of privatisation, adding that the Initial Public Offering (IPO) will benefit employees, 29 million policy holders and 1.2 million agents. Unions have expressed reservations against the move.

The listing will help enhance the transparency and governance and it will work to improve perception of LIC, Kumar told media after presenting a performance review.

On the government’s announcement of the IPO, Kumar said: “Perhaps I have been overruled on the IPO decision”. Last October, Kumar said LIC wasn’t ready for an IPO. “I won’t say I was completely surprised because talks around IPO have been surfacing for a while, but we were not consulted when the announcement was made in the Budget,” he said.

“It’s only been seven days since the announcement and we will meet representatives of the finance ministry next week to understand the steps ahead. It’s too early to comment on appointment of investment bankers and other steps,” Kumar added.

According to the chairman, the government will have to amend the Life Insurance Nationalisation Act to enable the IPO. “Our financials will have to be compliant with the Companies Act, and to make an assessment on valuations we need to also consider the value of physical assets, including land and building,” Kumar said, adding that he hoped to complete the valuations within a year.

At the end of January 2020 LIC posted 17.48 per cent growth in its first-year premium at Rs 45,199 crore and also policy sold grew by 29.42 per cent at 19.58 million.

As on January 31, the composite market share in policies stood at 77.61 per cent, up from 73.54 per cent a year ago, and first-year premiums stood at 70.02 per cent, up from 66.26 per cent.

On reducing stake in IDBI Bank, which is a subsidiary, LIC chairman said: “We have 12-year time frame to reduce our stake in IDBI Bank, but we may not wait that long.”

IDBI is doing well as a bancassurance partner for LIC and LIC Mutual Funds. 

“We expect the bank to turn profitable by the March quarter. The government has spoken about divesting its stake in the bank. They will engage with investment banks and the efforts are towards bring in a private equity investor.”

“We need to first create public float to generate interest in the IDBI Bank stock; float is now less than three per cent. LIC may not off-load its stake in IDBI Bank in this round, but if we get a good offer, we may consider selling some stake. It depends on the kind of interest it generates,” said the chairman.