NEW DELHI: Here comes the big ticket share sale. Life Insurance Corporation of India (LIC), the country's largest life insurer, is a candidate for disinvestment. Since the market cap of the life insurance giant is expected to be more than Rs 200,000 crore, the government is considering a minority stake sale of anywhere between 2-5%.

According to analysts estimates, the LIC stake sale of 5% could fetch the government close to Rs 10,000 crore. The government is looking at a minority stake sale in the life insurer, and analysts say the stock markets may not have the appetite to absorb a larger share sale.
 
The life insurer has about Rs 500,000 crore worth of stocks and bonds in its portfolio. It is the largest institutional player in the Indian markets with substantial stakes in top firms. Apart from this, LIC's value will be calculated on the basis of 20 crore policy holders paying premium every year.

A rough back-of-the-envelope calculation pegs LIC as nearly ten times bigger than its listed peer Reliance Capital, which has a market cap of Rs 23,000 crore.

There are regulatory approvals needed. The stock regulator needs to give it an exemption to offload 5%, which is lower than the obligatory 10% norm. The government has, in the past, sought such exemptions. Then, there is the issue of expanding the equity base of LIC, which presently is just Rs 5 crore. The insurance regulator has made it mandatory for all life insurers to have an equity base of Rs 100 crore. The bill to amend this is ready, and will be put for passage in the next session. The equity base expansion is a blessing in disguise for the government. It can invest Rs 90 crore to keep its stake at 95%, and offer the rest to the public and institutions.

Apart from LIC, the government plans to kick-start the stalled stake sale process by listing Oil India (OIL) and power firm NHPC in the current financial year. The government is looking at raise around Rs 5,000-7,000 crore.