Last Saturday, during the Budget 2020 presentation Finance Minister Nirmala Sitaraman surprised investors by proposing a part sale of the government stake in state-run behemoth Life Insurance Corporation of India (LIC) to meet its record asset-sale target.
The jumbo sale expected to fetch the government between Rs 85,000 crore ($11.9 billion) and Rs 1,00,000 Lakh crore if it gets done this year.
The astronomical valuations is based an average 12-month forward price-to-earnings ratio of 30 to 35 times.
LIC’s share sale would be the biggest India has ever seen and could create the nation’s most-valuable company by market value.
The nation’s largest transaction to date was Coal India’s $3.4 billion floats a decade ago.
LIC will be the equivalent of Saudi Aramco for India. LIC should have a valuation of above Rs. 50 lakh crore on a conservative basis.
Assuming that the government prices LIC IPO at Rs 40 lakh crore market capitalization and offers 10% to the public it will be 4 lakh crore, that’s almost double the Prime Minister Narendra Modi led government’s disinvestment target of Rs 2.1 lakh crore.
LIC IPO will be a mother of all IPO and it will replicate RIL’s efforts in the 80s of promoting equity investment culture in India.
It will probably also break the world record of UTI’s master gain MF of 1992 which had the maximum unitholders (65 lakh) in the world and found a place in guineas book of world records. It will probably a new beginning for India.
LIC will be the first company to have a Mcap of $750 to $800 billion.
With a market capitalization of Rs 8.77 lakh crore, Mukesh Ambani-led RIL is the most-valued company, followed by TCS with at Rs 8.12 lakh crore as on February 1, 2020.
LIC’s balance sheet is pretty strong, barring asset quality. LIC’s total assets under management crossed the historic figure of Rs 30 lakh crore for the first time in FY19 to Rs 31.11 lakh crore, a rise of 9.38% on the year.
As per the audited figures for FY19, its market value was pegged at Rs 28.74 lakh crore at end-March 2019, up 8.61%.
The total income of LIC, which includes total premium and investment income, was around Rs 560,784 crore in 2018-19, a rise of 7.10%.
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