Govt to file final papers for LIC IPO with Sebi soon

The government is planning to soon file the final papers for LIC IPO with market regulator Sebi, which will provide details about the price band, discount for policyholders and retail buyers, and the actual number of shares to be put on the block, an official said.

The government is presently in the wait-and-watch mode because of the market volatility induced by the Russia-Ukraine war and will decide on the timing of the initial public offering (IPO) of Life Insurance Corporation (LIC). “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,” an official told PTI.

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LIC had, on February 13, filed the draft red herring prospectus (DRHP) for LIC IPO. Earlier this week, Sebi gave approval to the draft papers, paving the way for the share sale. The government was expecting to garner over Rs 60,000 crore by selling about 31.6 crore or 5 per cent shares in the life insurance firm to meet the curtailed disinvestment target of Rs 78,000 crore in the current fiscal.

In case the initial share sale does not happen by March, the government will miss its revised disinvestment target for the current fiscal by a wide margin. As per the draft prospectus, LIC’s embedded value, which is a measure of the consolidated shareholders’ value in an insurance company, was pegged at about Rs 5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors.

Although the DRHP does not disclose the market valuation of LIC, as per industry standards it would be about 3 times the embedded value. At a 5 per cent stake dilution, the LIC IPO would be the biggest ever in the history of the Indian stock market and once listed, its market valuation would be comparable to top companies like RIL and TCS.

So far, the amount mobilised from the IPO of Paytm in 2021 was the largest ever at Rs 18,300 crore, followed by Coal India (2010) at nearly Rs 15,500 crore and Reliance Power (2008) at Rs 11,700 crore. The government, however, did not disclose in the DRHP the discount that will be given to policyholders or LIC employees in the public offering. As per norms, up to 5 per cent of issue size can be reserved for employees and up to 10 per cent for policyholders. During the current financial year so far, Rs 12,423.67 crore has been obtained through OFS, employee OFS, strategic disinvestment and buyback.