The government, which is committed to disinvest a part of its equity stake in public sector Life Insurance Corporation of India (LIC), has selected Milliman Advisors LLP India to ascertain its embedded value, a senior finance ministry official said.
“Government has selected Milliman Advisors LLP India as the Reporting Actuary for the Embedded Value of LIC. Work to start soon,” Tuhin Kanta Pandey, secretary at the department of investment and public asset management (DIPAM) said in a tweet. DIPAM is an arm of the Union finance ministry. Milliman is a global provider of actuarial services.
Finance minister Nirmala Sitharaman had announced about selling a minority stake in the government-run insurance behemoth giant in the Budget on February 1, 2020. “The government now proposes to sell a part of its holding in LIC by way of Initial Public Offer (IPO),” she had said. LIC is 100% owned by the Union government.
Explaining the rationale behind diluting government’s stake in LIC, the finance minister said: “Listing of companies on stock exchanges discipline a company and provides access to financial markets and unlocks its value. It also gives opportunity for retail investors to participate in the wealth so created.”
Milliman Advisors has been one of the three global actuarial services firms who made presentation to the government to undertake the valuation service, an important process necessary for the IPO, a finance ministry official said requesting anonymity. The firms had made presentations earlier this month.
Insurance Regulatory and Development Authority (IRDAI) norms stipulate filing of embedded value by an insurance company before launching its IPO. The applicant for IPO has to get valuation done by an independent actuary.
The sale of government’s minority stake in LIC is important to meet the disinvestment target Rs 2.10 lakh crore in 2020-21, the official said adding that the government would like to stick to the deadline. It has already appointed Deloitte and SBI Caps as pre-IPO transaction advisors.
The government has so far mopped up Rs 12,778 crore from disinvestment of public sector companies. It initially planned to raise Rs 1.20 lakh crore from disinvestment of central public sector undertakings and Rs 90,000 crore from selling stake in financial institutions.
LIC is one of the largest financial institutions in the country with assets under management of more than Rs 30 lakh crore, the official mentioned above said. “IPO is expected to bring in more transparency in the form of time bound disclosures and accountability besides it will deepen our capital markets,” he said.