Embedded value of LIC is pegged at Rs 5 lakh crore, says government official

The intrinsic value of Life Insurance Corporation of India (LIC) has been finalized at more than Rs 5 lakh crore, a government official who oversees what is expected to be the country’s biggest IPO said on Thursday.

Investors are eagerly waiting for the government to indicate the intrinsic value of LIC – a measure of future cash flows for life insurance companies and the main financial gauge for insurers – when it releases the draft IPO prospectus. (IPO), expected in a few days.

Although there has been speculation about the number in the media – from as low as Rs 3.96 lakh crore to as high as Rs 11.23 lakh crore – it is the first time that the government, which holds 100% LIC, comment the question.

Read also | India aims to file LIC’s draft IPO prospectus next week

The intrinsic value will help establish the market valuation of LIC and determine how much money the government will raise in the IPO. This will be crucial for the government to help it achieve its divestment goals and bring its budget deficit under control.

“I would say the intrinsic value could be more than Rs 5 lakh crore and the enterprise value will be a multiple of that,” said Tuhin Kanta Pandey, secretary of the divestment department. Reuters in an interview.

Indian media projected LIC’s market valuation at around four times intrinsic value.

LIC holds a majority share of the life insurance market in India. The government, which hopes to raise up to Rs 89,844 crore from selling a stake in the IPO, expects the proceeds to help it bridge a deficit gap this financial year. Pandey said the government plans to issue a draft IPO prospectus to investors as early as next week.

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