India plans to seek cabinet approval to sell a 25% stake in the country’s largest life insurer, people with knowledge of the matter said, as Prime Minister Narendra Modi seeks resources to fill a growing budget gap.
The government plans to amend the law of parliament establishing the Life Insurance Corporation of India to prepare for the sale, said the people, who asked not to be identified because the discussions were private. The timing of the insurer’s initial public offering will depend on market conditions and the sale is likely to take place in tranches, they added. A spokesman for the Finance Ministry was not immediately available for comment.
A sale of stake in LIC through a public offering of shares will help the government strengthen its finances after the coronavirus pandemic halted growth and threatens the fiscal deficit target of 3.5% of gross domestic product set for the year ending March 2021. ₹5.7 billion rupees through asset sales in the fiscal year as of April 1, against a target of ₹2.1 trillion.
The government chose Deloitte Touche Tohmatsu India Ltd. and SBI Capital Markets Ltd. to help India’s Life Insurance Corp. prepare for an initial share sale, Bloomberg News reported last month. The advisers will help assess the capital structure of India’s largest insurer and help the company rework its financial status, according to a tender document issued in June.
As part of the proposal, the government will also propose an amendment in parliament for an authorized capital of ₹20 billion rupees to be divided into 20 billion shares, people said.
A ministerial panel set up for the asset sale will decide the size of the public offering, while the cabinet will consider changes to the insurer’s capital structure, the people said. Going public with the insurer will help instill “discipline” and unlock value, Finance Minister Nirmala Sitharaman said in her February budget speech, without providing details or a timetable for the sale.
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