Budget 2020: Mega LIC IPO to be reality soon; India may soon have its Aramco moment

Budget 2020-21: Just as Saudi Arabia’s Aramco completed the largest public offering in the world’s history, the largest insurer in the country LIC IPO may create a similar buzz in India.

Union Budget 2020
Budget 2020-21: The country's exports contracted for the fifth month in a row by 1.8 per cent in December 2019 to USD 27.36 billion.

Budget 2020 India: LIC IPO: Just as Saudi Arabia’s Aramco completed the largest public offering in the world’s history, the largest insurer in the country LIC IPO may create a similar buzz in India. The government plans to raise funds by the IPO of LIC, Finance Minister Nirmala Sitharaman on Saturday said. “Government to sell a part of its holdings in LIC. A big disinvestment move and spells out the future road map to generate funds from alternate means and less dependency on taxes only”, Nitin Narang, Director – Nangia Andersen Consulting, said.

As against Rs 1.05 lakh crore target for the ongoing financial year, the government set a divestment target of Rs 2.1 lakh crore for FY21. So far this year, the government has divested Rs 18,094.59 crore. “LIC has been used in the past as a sovereign fund to support market sentiments in the past. With it’s disinvestment, such direct involvement of the Goverment in the market, will get truncated”, Vishwas Panjiar, Partner Nangia Andersen LLP, said.

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“Whilst it will definitely help deepen the markets, given that SEBI regulations need a minimum dilution of 10 percent to the public, it is unclear if there is enough liquidity for such a large sized IPO. Additionally, LIC has been a port of call for various PSU fund raises in the past. Given that LIC would be open to the public to invest, we understand that the government would also strengthen its governance policies especially when it comes to investments of its investable corpus”, Aditya Cheriyan, Partner, Khaitan & Co, said.

Meanwhile, in November last year, LIC Chairman MR Kumar said that it’s too early for LIC to go public. He had also said that the insurer sees plenty of high growth from here despite the ongoing slowdown in the economy, ET Now reported. Even as the slowdown has hit the insurance sector, LIC has done well as against the private sector peers and also managed to get some of the lost market share in the smaller cities, MK Kumar he had also said.

Meanwhile, market benchmarks Sensex and Nifty turned cautious in late-morning trade on Saturday as Finance Minster Nirmala Sitharaman began presenting the Union Budget 2020-21 in Parliament. After gyrating over 450 points in the morning session, the 30-share BSE Sensex was trading 30.84 points, or 0.08 per cent, higher at 40,754.33 at 1130 hours. Similarly, the 50-share NSE Nifty advanced 10.35 or 0.09 per cent, to 11,972.45.

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