Life Insurance Corporation (LIC) is India’s biggest insurance company with a monopoly in insurance market of over 60%. The public sector undertaking company is planning an IPO launch by end of financial year 2021-2022.
The embedded value of the company is estimated to be more than 4 lakh crore rupees and the market value of the company could be four times of the embedded value. The final report is yet to be published and numbers can change.
What Is Embedded Value?
It is an important metrics popular among insurance companies which adds the net value of assets and current value of future profits. The market value is generally four to five times higher than the embedded value. Due to this, government is expecting it to have market value of more than Rs 16 lakh crore.
What Would IPO Launch Mean?
If investors in the company would agree with the numbers that are being proposed by the government, LIC will become one of the largest companies in India. It will become the largest public sector undertaking and it will join the league of TCS and Reliance Industries. The market value of TCS and Reliance Industries Limited is 14.3 lakh crore and 17 lakh crore rupees respectively. The estimated market value of LIC is 16 lakh crore rupees.
The official statement has not come from Life Insurance Corporation or Government of India.
IPO launch is a part of Prime Minister Narendra Modi;s effort to suffice deficit in budget that got widened due to Covid-19 pandemic. IPO will launch by the end of March and government is planning to sell 5-10 % of stakes to the investors. The cabinet ministry will take a decision on the amount of shares that are to be sold. Experts have calculated that 5% stake will fetch nearly 75000 crore rupees.