IPO Update: LIC IPO Will Take Place in Early May, Certain Conditions Apply

If markets stay strong, the public offering of India’s Life Insurance Corporation (LIC) will take place in early May. However, if there is significant volatility in the next weeks, the issuance may be postponed. The government intends to sell a 5% stake in the state-owned insurance company.

If LIC’s initial public offering (IPO) does not take place by May 12, it will be required to revise the offer document with FY23 financials, which might cause the issue to be delayed until June or even later.

“The government is keeping a careful eye on the market. The coming two weeks are critical. If things start to calm down, it might happen before May 12; otherwise, it could be pushed back “ET was told by a top government official. “We don’t want to rush the problem because of global circumstances that are beyond our control.”

After two weeks of consultation with stakeholders, including the ten merchant bankers, a decision will be made, according to the official.

The draught red herring prospectus, or DRHP, has been amended by LIC with financial reports through December 2021.

Price at the time of issue

Given that the last valuation was performed some time ago, the embedded value may also need to be reviewed. As of April 5, the merchant bankers had yet to get input from anchor investors, according to the official. “Once we have the comments, we’ll decide on the issue price,” the employee quoted above added.

Another individual familiar with the discussions said there is no obligation to finish the problem by May 12, but if that deadline is missed, it may take longer to make the offer. “Although the mechanisms are in place, it’s possible that the embedded value may need to be reworked, which could take some time,” he said.

1. In two weeks, Dipam will assess the market condition.
2. The decision will be made in consultation with stakeholders, who will include ten merchant bankers.
3. Financial disclosures for the LIC DRHP are due till December 2021.
4. Given that the last assessment was made some time ago, embedded value may also need to be reviewed.

Milliman Advisors, an international actuarial consultancy, estimated LIC’s embedded value to be at 5.4 lakh crore as of September 30, 2021.

The LIC IPO was supposed to go public in March, but it was postponed due to market instability caused by the Ukraine conflict. Despite the fact that the market is stabilizing, the Centre remains cautious.

In the current financial year, the government has set aside 65,000 crores for disinvestment. With LIC’s inherent value (EV) estimated at 5.4 lakh crore, the 5 percent stake sale might yield 60,000-70,000 crore for the government.