Dear Zindagi: Listing may make LIC most valuable company


(This story originally appeared in  on Feb 02, 2020)
Life Insurance Corporation (LIC), when it lists, has the potential to zoom straight to the top of market capitalisation rankings in the domestic bourses as it’s expected to emerge as the country’s most valuable company, ahead of traditional heavy weights Reliance Industries or TCS.

LIC is the largest financial institution in the country with assets under management (AUM) of over Rs 31 lakh crore. SBI Life Insurance, which is predominantly owned by a publicsector bank, has an AUM of Rs 1.6 lakh crore and is valued at Rs 89,400 crore.

Valued on the basis of its AUM, LIC would have a market cap of Rs 55 lakh crore. Currently, the most valuable company is Reliance Industries with a market cap of Rs 8.8 lakh crore.

“Going by this valuation, the government can meet its entire disinvestment target of Rs 2.1 lakh crore by divesting 5% of LIC,” said Nilesh Sathe, former member, Irdai.

However, Sanket Kawatkar, head of actuarial firm Milliman’s life insurance practice in India, struck a cautious note on this valuation. He said that AUM alone cannot be a factor as it would vary according to product. The valuation for ULIP business would be different as compared to traditional business, which will be different from AUM obtained from group policies, he said. According to life industry executives, LIC has a large share of single-premium business where earnings are much lower than regular premium policies.

However, there are roadblocks to its listing, including an amendment to the Life Insurance Nationalisation Act of 1956. According to former LIC chairman S B Mathur, listing of the corporation will require amendments to the Act.


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