SEBI is considering exempting LIC from the statutory 5% float in IPO

Sources told CNBC-TV18 that the government, which has until May 12 to launch the LIC IPO without filing new papers with the market regulator, will not launch a follow-on public offering (FPO) for a year after listing, even as the watchdog considers the government’s request for an exemption from the mandatory five percent listing on float.

If a company’s post-issue capital, computed at the offer price, exceeds Rs 1 lakh crore, it must issue shares worth Rs 5,000 crore and five percent of its equity, according to current guidelines.

If the offer is less than the amount calculated for large enterprises under this standard, the government will need a waiver from the watchdog.

The five percent IPO rule might result in a Rs 35,000 crore IPO, and the market is unlikely to be interested in such a large public offering.

According to a report published on April 22, the IPO’s size could be reduced by 40%, from Rs 55,000-60,000 crore to Rs 30,000 crore.

Typically, firms are unable to do an FPO until six months after the float.

On February 13, LIC filed its IPO draught documents. The government has until May 12 to launch the LIC IPO without having to file new paperwork with market regulator SEBI, and if it misses the deadline, LIC would have to file new papers with SEBI with the December quarter’s results.

The sale of 31.6 crore shares in the country’s largest insurer was scheduled for March but was postponed due to the Russia-Ukraine conflict. The issue will set aside 35% of the offering for retail investors, 10% for policyholders, and 5% for the LIC.

The IPO would make a significant contribution to the current fiscal year’s divestiture proceeds. Divestment receipts are expected to reach Rs 65,000 crore in 2022-23, up from Rs 13,531 crore the previous fiscal year.

Source: CNBC-TV18