The Indian government is pushing to get the initial public offering (IPO) of state-backed Life Insurance Corp of India (LIC) across the line by March next year, and any delay would not be due to a lack of political will, Indian Minister of Finance Nirmala Sitharaman said on Sunday.
“We are pushing to have it done,” Sitharaman in an interview in New York. “The problem is not that we don’t want it or we are pussyfooting on it now, it is more a question of doing the due process.”
The internal valuation that is needed “almost annually” for a company of LIC’s size, “hasn’t been done,” Sitharaman said.
As the 65-year old insurer has not ever been valued, the process would take time, she said.
“So the delay or the time that is being consumed is not due to the lack of political will to go ahead with the stated policy,” Sitharaman said.
She announced plans to sell shares in the insurer in February last year, but the COVID-19 pandemic slowed the process.
The minister revived the offering in February this year, but the valuation report, which is key for investors and bankers, has yet to be finalized. The government has appointed bankers and legal advisers for the sale and held meetings with stakeholders.
Valuing the giant insurer that holds more than US$511 billion in assets — equivalent to the size of India’s mutual fund industry — and controls two-thirds of the nation’s market, has been going on for months.
The government is seeking to raise as much as 10 trillion rupees (US$132.76 billion) by selling up to a 10 percent stake. The sale of a 5 percent stake would make it India’s largest IPO, while a 10 percent dilution would make it the second-biggest of an insurer globally.
“I can’t go to the market without doing my own internal valuation,” Sitharaman said. “I will have to go through the necessary and due path before I go to the market and say: ‘Yes, I am fulfilling my commitment.’”
The IPO is crucial for the government because it would make up the bulk of its plans to raise 1.75 trillion rupees through asset sales this fiscal year.
Meanwhile, India is in no hurry to withdraw the pandemic-era stimulus and is ready to do more if required to support the nation’s economic recovery, Sitharaman said.
“They will continue,” she said, referring to fiscal measures to counter the effects of the COVID-19 outbreak.
“The emphasis on building health infrastructure will continue,” and so would government spending on capital expenditure and infrastructure, she said.
Sitharaman, who is due to present India’s annual budget on Feb. 1, echoed Reserve Bank of India Governor Shaktikanta Das’ sentiment on the need to keep policy easy as the economy makes its way out of the pandemic.
The central bank, as well as the IMF, expect the nation’s GDP to grow 9.5 percent in the year to March — the quickest pace among major economies — after contracting 7.3 percent last year.
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