LIC IPO Mega Disinvestment Plan.
                     LIC IPO MEGA DISINVESTMENT PLAN
INTRODUCTION
 The government has started the process to launch 
the initial public offer (IPO) of Life Insurance 
Corporation (LIC) within this year. 
 The IPO is expected to be the biggest in the Indian 
capital markets given the size and scale of LIC, the 
country’s oldest and largest life insurer. 
Source: indianexpress.com
PREPARATORY PROCESSES
 The finance ministry invited bids from transaction 
advisors, including consulting firms, investment 
bankers, and financial institutions, for assisting the 
government in the preparatory processes leading 
to the IPO.
Source: indianexpress.com
CHANGES RELATED TO CAPITAL MARKET
 There is a proposal to amend six sections in the 
LIC Act, which includes changes related to the 
capital structure, board of directors, among others. 
 Cabinet approval is expected in a month and after 
this the changes will be introduced in the 
Parliament for its approval.
Source: moneycontrol.com
GOVERNMENT SHAREHOLDING
 The cabinet approval will enable dilution of the 
government shareholding by 25%, but in tranches, 
in line with government regulations. 
 The government owns 100% in the country’s 
largest insurer. 
Source: livemint.com
VALUATION PROCESS
 The process of listing LIC on domestic bourses will 
take more than a year as the process may involve 
amendment in several laws, looking at the 
Securities and Exchange Board of India (SEBI) 
regulations and significant time will be spent 
finding out the valuation.
Source: livemint.com
INTER-MINISTERIAL COMMITTEE 
 An inter-ministerial committee was set up in 
February, comprising officials from the department 
of investment and public asset management 
(DIPAM), department of financial services and law 
ministry to oversee the stake sale in LIC.
Source: thehindu.com
DISINVESTMENT TARGET 
 The government’s plan to sell a part of its stake in LIC 
is a part its massive ₹2.1 trillion disinvestment target 
that was announced in the Budget for 2020-21.
 Out of the total target, the finance ministry hoped to 
get ₹90,000 crore from LIC and IDBI Bank stake sales. 
Source: livemint.com
WHAT IS THE SIZE AND POSITION OF LIC IN INSURANCE 
MARKET?
 The share sale of LIC, which was set up in 1956, 
is expected to be the largest.
 The insurer’s total assets had touched an all-time 
high of Rs 31.11 lakh crore in 2018-19, an 
increase of 9.4 per cent. 
 The Corporation realized a profit of Rs 23,621 
crore from its equity investment during 2018-19, 
down 7.89 per cent from Rs 25,646 crore in the 
previous year. 
Source: indianexpress.com
WHAT BENEFITS CAN BE EXPECTED THROUGH THE IPO?
 An IPO will certainly bring in transparency into 
affairs of LIC since it will be required to inform 
financial numbers and other market-related 
developments on time to the stock exchanges.
Source: Investopedia.com
PROFIT FOR INVESTORS
 Investors can benefit from picking up equity in 
the insurer, which has been making underwriting 
profit as well as profits on its investments. 
 LIC’s investment in various equity and bond 
instruments will come under greater scrutiny 
after its lists on the exchanges.
Source: indianexpress.com