The much anticipated initial public offering (IPO) of Life Insurance Corporation (LIC), which is expected in the third quarter of the next financial year, is making headway with the valuation exercise set to begin shortly.

Finance minister Nirmala Sitharaman had announced an IPO of the country’s largest life insurer in last year’s budget. However, the Covid-19 pandemic adversely hit these plans.

“In 2021-22, we would also bring the IPO of LIC for which I am bringing the requisite amendments in this session itself,” finance minister Nirmala Sitharaman said while announcing the Union Budget for 2021-22.

The budget has estimated that the government will rake in Rs 1.75 lakh crore from stake sales in PSUs.
On Tuesday, LIC managing director Mukesh Gupta reportedly said the valuation exercise by the selected actuary will commence soon. This is a key step before the IPO.

Last year, the department of investment and public asset management (Dipam) had said LIC needs to develop an Indian embedded value reporting framework for necessary disclosures for the IPO. It had then issued a request for proposal to seek bids from actuarial firms.

Embedded value is a valuation measure used to estimate the consolidated value of shareholders’ interest in an insurance company.

While there has been a lot of speculation, conservative estimates say the government could raise upto Rs 1 lakh crore from the offering.

The latest development comes amid a huge 45 per cent drop in the insurer’s individual annual premium equivalent (APE) in January, which capped the industry growth at 8 per cent for the month.

APE is a measure of new business of a life insurance company. It is computed as the sum of annualised first year premiums on regular premium policies, and 10 per cent of single premium policies.