IPO Update: Government Plans to File Final Papers For LIC IPO With SEBI Soon

The government plans to file the final papers for the LIC IPO with market regulator SEBI soon, which will include information about the price band, discount for policyholders and retail buyers, and the actual number of shares to be put on the market, said by an official.

Because of the market volatility caused by the Russia-Ukraine war, the government is currently in a wait-and-see mode and will decide on the timing of Life Insurance Corporation’s initial public offering (IPO) (LIC).

An official told PTI that “We have got the approval of the DRHP and the next step would be to file the RHP, which will give details of the price band and the actual number of shares. We are watching the situation, and soon we will take a call on the timing of the share sale.”

On February 13, LIC filed the Draft Red Herring Prospectus (DRHP) for the LIC IPO. Sebi approved the draft papers earlier this week, paving the way for the share sale.

To meet the current financials’ curtailed disinvestment target of Rs 78,000 crore, the government expected to raise more than Rs 60,000 crore by selling approximately 31.6 crore or 5% of the life insurance firm’s shares.

If the initial share sale does not take place by March, the government will fall far short of its revised disinvestment target for the current financial year.

According to the draft prospectus, LIC’s embedded value, which is a measure of the consolidated shareholders’ value in an insurance company, was estimated by international actuarial firm Milliman Advisors to be around Rs 5.4 lakh crore as of September 30, 2021.

Although the DRHP does not disclose the LIC’s market valuation, according to industry standards, it would be approximately three times the embedded value.

With a 5% stake dilution, the LIC IPO would be the largest in Indian stock market history, and once listed, its market valuation would be comparable to top companies like RIL and TCS.

So far, the amount raised from Paytm’s IPO in 2021 has been the highest ever at Rs 18,300 crore, with Coal India (2010) raising nearly Rs 15,500 crore and Reliance Power (2008) raising Rs 11,700 crore.

However, the government did not disclose in the DRHP the discount that will be provided to policyholders or LIC employees in the public offering. According to regulations, up to 5% of the issue size can be reserved for employees and 10% for policyholders.

So far, Rs 12,423.67 crore has been obtained through OFS, employee OFS, strategic disinvestment, and buyback during the current financial year.

Source: Business Standards and PTI