Government is seeking a valuation of between 8 trillion rupees ($109 billion) to 10 trillion rupees for Life Insurance Corporation, in what's slated to be the nation's biggest initial public offering.

The possible valuation is based on preliminary talks and may change after detailed discussions, due diligence and an official valuation report, according to people with knowledge of the matter.

The government is considering selling 5%-10% of the company, which could raise between 400 billion rupees and 1 trillion rupees, the people said.

The government is pushing ahead with LIC's IPO to help plug a widening budget gap as it aims to raise 1.75 trillion rupees by March through divestments.

LIC's stake sale is crucial for the government to achieve its broader disinvestment target. India may also allow foreign direct investment in LIC to ensure a diversified and strong demand across various segments of investors.

Bankers formally met government and LIC officials last week to formally kick off the process. IFR had reported on the estimated valuation earlier.