LIC IPO ( Life Insurance Corporation Of India ) Postponed till FY-2022

When Finance Minister Nirmala Sitharaman was listing out divestment plans for 2020-21 in her Union Budget speech on February 1, Life Insurance Corporation of India (LIC) was the only company she mentioned by name. “The government now proposes to sell a part of its holding in LIC by way of Initial Public Offer (IPO),” Sitharaman said.

The expectation was that the LIC IPO — India’s largest — and Bharat Petroleum’s planned privatisation would be the two single biggest transactions this year, among the many that had been planned. So confident was the government of these efforts that it gave itself the highest-ever divestment target of Rs 2.1 lakh crore, of which Rs 90,000 crore was expected to come from LIC’s IPO and the government’s exit from IDBI Bank.

All these happened before the COVID-19 pandemic flatlined the Indian economy. Now with the first half of the fiscal year over, there is a clear realisation within the government and LIC there is no way India's largest insurer can make its market debut before March 31, 2021. Multiple highly placed sources in the government and the company have told Moneycontrol that realistically speaking, the IPO may not happen before the second quarter (July-September) of fiscal year 2021-22.

“A company of LIC’s size is not just a divestment, it is a policy decision on its own. Once they comply with all the regulations of listing, it is only a matter of time. But to comply with all regulations is a long, strenuous process for a company the size and complexity of LIC,” a senior government official said.

The COVID-19 pandemic and the nationwide lockdown in April-June quarter brought economic activity to a grinding halt. The government’s direct and indirect tax collections have suffered massively, even as expenditure commitments continue to mount. In this situation, the fact that even sources of non-tax revenue and capital receipts like divestment will be nowhere close to the budgeted levels just adds to the problems being faced by policymakers in North Block.

For LIC, even picking an advisor took time. It was only in August that SBI Capital Markets and Deloitte were chosen to be the pre-IPO advisors for what could be the country’s largest IPO. That was only the first step in quite a lengthy process.