LIC IPO to open doors for other insurance cos’ share market listings; Fitch tells 2 major benefits

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February 26, 2020 2:12 PM

After LIC IPO gets launched, other insurance firms may be encouraged to list their shares in the stock market going ahead, a rating agency said.

In budget 2020, Finance Minister Nirmala Sitharaman had announced the IPO of LIC. She had said that the IPO would be a part of the government’s disinvestment initiative.

After LIC IPO gets launched, other insurance firms may be encouraged to list their shares in the stock market going ahead, a rating agency said. The execution of the public offering of LIC may see benefits passing down to the entire domestic sector through the inflow of increased foreign capital, news agency PTI reported citing Fitch Ratings as saying. The proposed IPO is expected to improve the accountability and transparency of the LIC and also benefit the country’s insurance sector, it added. In budget 2020, Finance Minister Nirmala Sitharaman had announced the IPO of LIC. She had said that the IPO would be a part of the government’s disinvestment initiative. The government currently holds a 100 per cent stake in LIC. Since the publicly listed LIC will be exposed to strict exposure requirements by SEBI, it will create a robust culture of compliance and accountability with the insurer.

“We think the insurer’s investment allocation decisions will be rationalised too, as major investment decisions could be subjected to additional scrutiny and approvals. LIC is one of the prominent institutional investors in several public sector assets, and in multiple instances has obtained exceptions from the insurance regulator to increase its stake in investee companies above the regulatory ownership cap of 15 per cent,” it added.

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In November 2019, MR Kumar had said that it’s too early for the country’s largets insurer to go public. He had also said that even as the economic slowdown has hit the insurance sector, LIC has done well as against the private sector peers.

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