2021-02-19 20:40:09
The above is news from Indian Express. No need to read the entire article, just read the highlighted part and see the details below.
1) Market Capitalization = Number of shares issued X Share price of each share
2) Those companies which are getting listed (and whose market capitalization after listing is more than Rs. 4000 crore) need to offer 10% shares to the public and within 3 years minimum public shareholding should be 25%. That means promoters will have to reduce their ownership below 75%.
3) For bringing in IPO, the LIC Act 1956 will be amended through Finance Act 2021. (May be the earlier Act did not allow reducing Govt's stake that is why amendment required)
4) And the most important point is With IPO, will Govt. of India receive money or NOT ?? i.e. will it lead to capital receipts for the Govt. and result in budgetary resources ?? Will it lead to disinvestment ??
The answer is YES. Let us understand.
When Govt. brings in Initial Public Offer (IPO) that means it is
listing the securities (here shares/equity) of the company (LIC) on the stock exchange. Now there can be two options to this:
First. Govt. is bringing the IPO of LIC so that LIC can raise money and it should be able to grow and here Govt. do not want money and Money will come to the COMPANY. In this case
shares will be issued to the NEW investors and Govt. will retain its shares in the company BUT Govt.'s shareholding (in % terms) will reduce because of the new investors coming in But the value of Govts. share will remain SAME.
Second. By brining in IPO of LIC, Govt wants money. In this case, Govt will give its shares to the public and public will pay money to Govt. of India (and Not LIC) and now public/investors will own LIC.
Or it can be a combination of Both. In this case Govt. will sell some of its shares to the public/investors and Govt. will get the money but Govt will still retain majority of the shareholding in LIC.
As in the Budget Speech, Finance Minister said that IPO of LIC will fetch some money to Govt. of India (and it will be a disinvestment receipt). So it means that in case of LIC IPO it is going to be the combination of first and second option both.
15.5K views17:40
E
