India’s Slashed Asset Sale Goal Raises Questions on LIC IPO
India sharply reduced its asset-sale targets, raising questions about how much it sees raising from LIC's share sale.
(Bloomberg) -- India sharply reduced its asset-sale targets, raising questions about how much it plans to raise from the marquee initial public offering of its biggest state insurer.
Prime Minister Narendra Modi’s government on Tuesday announced it estimates 780 billion rupees ($10.4 billion) from divestment in the year through March 31, much lower than the 1.75 trillion rupees budgeted earlier. It has already raised 120 billion rupees by selling stakes in other companies.
For the next financial year, the target is 650 billion rupees.
That raises the question about whether the government has downgraded expectations from the IPO of Life Insurance Corporation of India, is staggering the share sale, or is merely being conservative with estimates until the money is actually raised. The IPO will happen this financial year in all probability, Finance Minister Nirmala Sitharaman said at a briefing.
“Too high a disinvestment target distorts the market,” Tuhin Kanta Pandey, the top government official in charge of asset sales, told reporters at the same briefing. “LIC valuations are yet to reach final conclusion.”
As recently as last week, Pandey, who is Department of Investment and Public Asset Management Secretary, had told the Press Trust of India that India plans to list LIC by March and include the proceeds in the budget numbers.
“It appears as if the inflows from the LIC listing have been split over fiscal years 2022 and 2023,” said Aditi Nayar, an economist at Icra Ltd.
For almost two years, India has steeled itself for a gargantuan task: readying the country’s premier insurer -- with nearly $500 billion in assets and a valuation estimated as high as $203 billion -- for what could become its biggest-ever stock listing. A knock-out listing could see LIC raise as much as $10 billion from the IPO with a minimum dilution of 5%.
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