India is pushing for a valuation of over Rs. 15 trillion ($203 billion) for a state-owned insurer that is slated to apply for the country's largest initial public offering soon, even as arrangers awaited a final assessment on the firm's assessed worth, people familiar with the subject have stated.
The so-called embedded value of Life Insurance Corporation of India is expected to exceed Rs. 4 trillion, while its market worth might be four times that, according to the people who asked not to be identified since the discussions are private. The government's desired valuation may alter after the final report is received.
A significant indicator for insurers is embedded value, which mixes the current value of future income with the net value of assets. The indicator will be included in LIC's IPO prospectus, which is expected to be filed in the week of January 31. Typically, insurers' market worth is three to five times their embedded value.
If investors accept the government's estimations, LIC will enter the ranks of India's largest firms, including Reliance Industries Ltd. and Tata Consultancy Services Ltd., which have market capitalizations of Rs. 17 trillion and Rs. 14.3 trillion, respectively.
A representative for the Finance Ministry did not return calls requesting comment, and LIC declined to comment.
Two of the people warned that the administration may be pushing its expectations too far. They stated that the final valuation would be determined depending on a number of factors, including investor appetite, profitability prospects, and industry trends.
The insurer's first-ever share offering is part of Prime Minister Narendra Modi's efforts to raise funds and try to narrow a budget deficit that has grown as a result of the pandemic. Before the end of March, the government intends to sell 5-10% of the company.
A ministerial panel will decide on the amount of shares to be sold later this month, before LIC files the draft prospectus with the market regulator. A 5% interest in the company would be worth Rs. 75,000 crores at the government's desired valuation.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.