Indian government has proposed to considerably raise the authorised capital of Life Insurance Corporation of India (LIC) to Rs.25,000 crore. This initiative has been taken to facilitate its listing slated for the next fiscal.

At present, the paid-up capital of the life insurance company that has more than 29 crore policies is Rs.100 crore. It is Starting with an initial capital of Rs.5 crore in 1956, LIC has an asset base of Rs.31, 96,214.81 crore.

The authorised share capital of LIC shall be Rs.25,000 crore divided into 2,500 crore shares of Rs.10 each, according to the amendments proposed in the Life Insurance Corporation Act, 1956.

The amendments proposed as part of Finance Bill 2021 will lead to the setting up of a board with independent directors in line with listing obligations.

According to one of the 27 proposed amendments, the central government would hold a minimum of 75 percent in LIC for the first five years post the IPO, and subsequently hold at least 51 percent at all times after five years of the listing.
Furthermore, up to 10 percent of the LIC IPO issue size would be reserved for policyholders, Minister of State for Finance Anurag Thakur had said last month.

He further adds that the government would remain the majority shareholder and would continue to retain management control, safeguarding the interest of policyholders.

Currently, the government owns 100 percent stake in LIC. Once listed, it is likely to become the country's biggest company by market capitalisation with an estimated valuation of Rs 8-10 lakh crore.

The Department of Investment and Public Asset Management (DIPAM), which manages the government's equity in state-owned companies, has already selected actuarial firm Milliman Advisors for ascertaining the embedded value of LIC for meeting the government's disinvestment target.

Deloitte and SBI Caps have been appointed as pre-IPO transaction advisors.

The Budget 2021-22 has set a disinvestment target of Rs 1.75 lakh crore, higher than the Rs 32,000 crore estimated to be garnered in the current fiscal.

Of the Rs 1.75 lakh crore, Rs 1 lakh crore is to come from selling government stake in public sector banks and financial institutions, and Rs 75,000 crore would come as CPSE disinvestment receipts.