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LIC IPO may be the much needed windfall for this government department

market | Apr 28, 2022 1:56 PM IST

LIC IPO may be the much needed windfall for this government department

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Government sources told CNBC-TV18 that the LIC IPO mop-up was not factored in for the budget estimates of divestment for the current financial year. "Expect IPO receipts to be a bonus for FY23 budget aim," said the sources.

The proceeds of insurance major Life Insurance Corporation's (LIC) initial public offering (IPO) could be a bonus for the government's divestment target for the financial year 2023. Government sources told CNBC-TV18 that the LIC IPO mop-up was not factored in for the budget estimates of divestment for the current financial year.

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"Expect IPO receipts to be a bonus for FY23 budget aim," said the sources, who did not want to be named.
The government has set its disinvestment target for the current fiscal at Rs 65,000 crore with the Rs 21,000 crore aimed to be raised from the LIC IPO not factored in as it had considered the proceeds from the public issue for FY22 divestment aims.
The government, for the past few years, has not been able to achieve its divestment targets. It mopped up Rs 18,000 crore against the Rs 78,000 crore divestment target set for FY22. In FY21, the Centre achieved only 16 percent of the Rs 2.10 lakh crore divestment target set while in FY20, it mopped up 48 percent of the Rs 1.05 lakh crore.
YearDivestment Targetmet
FY11Rs 40,000 cr-
FY12Rs 40,000 crRs 13,894 cr
FY13Rs 30,000 crRs 23,957 cr
FY14Rs 40,000 crRs 15,819 cr
FY15Rs 43,425 crRs 24,349 cr
FY16Rs 41,000 cr^Rs 23,997 cr
FY17Rs 56,500 crRs 46,249 cr
FY18Rs 1,00,000 crRs 1,00,056 cr
FY19Rs 80,000 crRs 84,972 cr
FY20Rs 1,05,000 crRs 50,299 cr
FY21Rs 2,10,000 crRs 32,845 cr
Source: DIPAM
"Aim was to get LIC listed even with the smallest possible issue size... The government’s concern was to get LIC listed instead of budget receipts," added the sources.
The LIC IPO, which was to be launched in March this year, was postponed after Russia's invasion of Ukraine that sent shockwaves through markets that may have led to reduced enthusiasm around the public issue.
The LIC IPO is now set to open on May 4 and will close on May 9. It will open for the anchor tranche on May 2.  The government has set a price band of Rs 902 to 949 per equity share, with a discount of Rs 60 for policyholders.
The IPO size has been trimmed to raise Rs 21,000 crore, from the earlier Rs 35,000 crore, with the government reducing its stake dilution to 3.5 percent from the earlier 5 percent.
As sources told CNBC-TV18 earlier, the government had asked for an exemption from market regulator SEBI from the mandatory 5 percent listing as the market would not have enough appetite for the same.
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