LIC’s embedded value set at over Rs 5 trillion: DIPAM Secretary

State-run Life Insurance Corporation of India’s (LIC) embedded value has been finalised at more than Rs 5 trillion, a government official who is overseeing what is expected to be the country’s largest IPO said on Thursday.

Investors are eagerly waiting for the government to indicate LIC’s embedded value - a measure of future cash flows in life insurance companies and the key financial gauge for insurers - when it releases the initial public offering (IPO) draft prospectus, expected in a matter of days.

While there has been speculation about the number in media - from as low as $53 billion to as high as $150 billion - this is the first time the government, which owns 100% of LIC, is commenting on the matter.

The embedded value will help establish the market valuation of LIC and determine how much money the government raises in the flotation. That will be crucial to the government to help meet its divestment targets and keep its fiscal deficit in check.

“I would say the embedded value could be more than Rs 5 trillion and the enterprise value will be multiples of that,” Tuhin Kanta Pandey, Secretary, department of divestment. Media reports have projected LIC’s market valuation at around four times the embedded value.

LIC has a majority share of the life insurance market in India. The government, which hopes to raise as much as $12 billion from selling a stake in the IPO, expects the proceeds will help it bridge a deficit gap this fiscal year.

Pandey said the Centre planned to issue a draft IPO prospectus to investors as early as next week.

It has so far raised about Rs 12,000 cr by selling stakes in other companies.