IPO Update: LIC IPO Filing Next Week, Issue in March, Valued at More than 5 Lakh Crore

The government is expected to publish draught papers for the LIC’s massive initial public offering with market regulator Sebi next week, with a portion of the offering set aside for anchor investors.

The embedded value of the state-run Life Insurance Corporation of India (LIC) has been set at more over 5 lakh crore rupees ($66.82 billion), according to a government official handling the country’s largest IPO.

Investors are eagerly awaiting the government’s announcement of LIC’s embedded value – a measure of future cash flows in life insurance businesses and a critical financial gauge for insurers – when the IPO draught prospectus is released, which is likely in a couple of days.

Tuhin Kanta Pandey, Secretary to the Department of Investment and Public Asset Management (DIPAM), said the insurance regulator’s clearance is pending, after which the draught prospectus indicating the size of the share sale will be filed, according to PTI. “Within 7-10 days, the DRHP (Draft Red Herring Prospectus) for the LIC’s IPO will be filed. Informally, we have been consulting Sebi on various issues. The size of the issue would be mentioned in the DRHP,” he said.

The embedded value of Life Insurance Corporation (LIC) has been determined, according to Pandey, and the company must now seek approval from insurance regulator IRDAI. “A portion of the IPO would be kept for anchor investors, like we did with the IRFC and RailTel IPOs,” Pandey explained. According to PTI, up to 10% of the LIC IPO offer size will be earmarked for policyholders.

The government aims to come out with the initial public offer (IPO) and subsequently list LIC on the bourses by March, he further added.

The government has raised over Rs 12,000 crore so far through the privatization of Air India and the sale of stakes in other PSUs.

LIC holds a substantial stake of the life insurance market in India. The government anticipates the earnings from selling a part in the IPO, which could raise up to $12 billion, to help it close a deficit gap this fiscal year.

The government has picked ten merchant bankers to manage the country’s largest insurer’s massive IPO, including Goldman Sachs (India) Securities Pvt Ltd, Citigroup Global Markets India Pvt Ltd, and Nomura Financial Advisory and Securities (India) Pvt Ltd. The government is also considering allowing foreign investors to buy LIC stock. Foreign portfolio investors (FPIs) are allowed to buy shares in a public offering under Sebi rules.

The proposal for LIC’s initial public offering (IPO) was approved by the Cabinet Committee for Economic Affairs in July of last year and Finance Minister Nirmala Sitharaman stated in her Union Budget 2022 speech that the public issue of the LIC is expected shortly.

On February 3, LIC established a partnership with insurance aggregator Policybazaar.com to expand the accessibility of its products ahead of its much-anticipated initial public offering (IPO). “LIC, the country’s pioneer in life insurance, and Policybazaar.com have partnered to offer a wide choice of term and investment products to consumers,” the companies said in a joint statement, adding that the collaboration will be formally launched today.

According to the announcement, the collaboration “aims to facilitate seamless digital distribution of life insurance products across the country.”

Sarbvir Singh, CEO of Policybazaar, said the partnership is based on a strategic goal to “extend our reach, especially in smaller cities, to achieve financial inclusion and social security.”

LIC has partnered with a private insurance aggregator for the first time to broaden its footprint. To date, the insurance behemoth has depended on its massive network of over 1.3 million agents to expand its customer base.