Finance Ministry has invited bids from actuarial firms to value Life Insurance Corporation of India (LIC) before listing the insurance major on stock exchanges. The selected firm will be required to assess LIC’s embedded value before its initial public offering (IPO).
In the last Budget, Centre had announced that it intends to sell minority stake in LIC and list the company on bourses. The government has already appointed Deloitte and SBI Capital Markets as pre-IPO transaction advisors.
In its request for proposal (RFP), Department of Investment and Public Asset Management (DIPAM) stated that LIC needs an Indian Embedded Value (IEV) reporting framework for the necessary disclosures for its proposed IPO. The selected actuarial firm will work with LIC to develop IEV “in line with the requirements of the relevant Acts and Regulations, Actuarial Practice Standards and Guidance Notes issued by the Institute of Actuaries of India (IAI) and LIC Act, 1956 and to provide support during the IPO process,” DIPAM said.
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Embedded value is used by life insurance companies to estimate the consolidated value of shareholders’ interest in the company. It is calculated by adding the present value of projected future profits from in-force policies and net asset value of the company’s capital and surplus. It usually serves as a performance metric.
Interested bidders can seek clarifications online till November 24. A pre-bid meeting will be convened on November 26. The last date to submit bids is December 8, which will be opened a day later.
The selected firm will also interact with different advisors and stakeholders, including insurance regulator IRDAI and markets regulator SEBI, advise on the scope of data audit as mandated by regulators and provide inputs regarding relevant sections of IPO.
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In the 2020-21 Budget, Finance Minister Nirmala Sitharaman had announced government’s plan to sell a part of its holding in LIC by way of IPO. This would be crucial in meeting the budgeted disinvestment target of Rs 2.10 lakh crore for this financial year, which includes Rs 1.20 lakh crore from stake sale in CPSEs and Rs 90,000 crore from offloading stake in financial institutions.