Ahead of its mega IPO, India’s LIC appoints an insurance veteran as its CFO

Life Insurance Corporation of India said on 3rd March that it has chosen insurance veteran Sunil Agrawal as its new chief financial officer ahead of its big IPO debut, according to sources. Starting in March 2022, he has been appointed on a contract basis.

In September 2021, LIC advertised for the recruitment of a CFO for six months. The 65-year-old insurance indicated in a public announcement that the position will be contractual, with a three-year tenure or until the new LIC CFO reaches the age of 63. It further said that the compensation for the position will be Rs 75 lakh per year.

This is the first time LIC has employed someone from outside the company for a key financial post. Sunil Agrawal’s former job was as the CFO of Reliance Nippon Life Insurance, where he worked for almost 12 years till 2018. He has previously spent five years at ICICI Prudential Life Insurance. He took over for Shubhangi Sanjay Soman, who had previously served as LIC’s Executive Director of Finance and Accounting.

In the next five years, the government may sell up to 25% of its stake in LIC

While the finance ministry monitors global market conditions to see if they warrant deferring the state-run LIC’s initial share sale, it is finalizing a long-term, five-year plan to sell up to 25% of its equity in the company, according to two officials familiar with the matter who spoke on the condition of anonymity. They noted that the first 5% share sale might be followed up by a so-called FPO, or follow-on public offer, of 5-10% more within a year.

Policyholders, staff, retail investors, and financial institutions will all have a role in improving LIC’s openness and efficiency, while the government will always own the majority share and exercise managerial oversight.

Depending on its disinvestment plans and market demand, the government may progressively decrease its stock in LIC after the IPO, which is slated for this month. It is impossible to predict the magnitude and timing of such offers in advance.

He stated that the FPO might arrive around 2023-24. The government submitted a draft red herring prospectus on February 13 to sell 5% of its equity share in LIC in March, enabling all sorts of institutional and retail investors, including LIC policyholders and staff, to participate.

Further Key Takeaways

The LIC IPO timeline has not changed as a result of the Russia-Ukraine situation, but the issue might be postponed if the market justifies it and specialists advise it. The goal is simple: we must maximize value for the government as well as prospective shareholders.

In an interview on Wednesday, Finance Minister Nirmala Sitharaman indicated the government may reconsider the date of LIC’s inaugural share sale. “Ideally, I’d want to go forward with it since it’s something we’ve been planning for a long time just for Indian reasons.” But today, if global concerns need it, I wouldn’t mind looking at it again,” she said.

According to experts, if the IPO’s target market is exclusively domestic investors, it may be launched and concluded before the March 31 deadline. Before issuing the IPO, one should wait for the situation in Ukraine to stabilize. It may take 2-3 weeks for the situation to stabilize, after which the Government of India may contact investors for value feelers. If only domestic variables are taken into account, the LIC IPO might be completed by March 31, according to analysts.

In a meeting headed by the Prime Minister on Saturday, the union cabinet approved up to 20% foreign direct investment in LIC through the automatic method, opening the way for foreign capital to participate in one of the country’s largest IPOs. The IPO is expected to be worth roughly Rs 65,000 crore, according to experts. The company’s embedded value is estimated to be around 5.4 lakh crore rupees. While the DRHP does not reveal the LIC’s market value, analysts estimate it to be over Rs. 16 lakh crore.

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.