The government is likely to launch Life Insurance Corporation’s (LIC) initial public offering by early-May. It might offer to sell more than 5 per cent stake through the public offer, according to sources.
The government is in touch with bankers and advisors to finalise the company’s red-herring prospectus for the initial public offering, the sources told CNBC-TV18. They also said the global economic uncertainties have been factored in and market volatility has ebbed.
The state-owned insurance behemoth has already received capital markets regulator Sebi’s go-ahead to raise funds through an initial share sale. According to the draft red herring prospectus (DRHP) filed with Sebi, the government will sell over 31 crore equity shares of LIC, a portion of which will be reserved for anchor investors.
Up to 10 per cent of the IPO issue size will also be reserved for policyholders, while up to 35 per cent for retail investors. The IPO is fully an offer for sale (OFS) by the government and there will not be any fresh issue of shares by LIC. The government holds a 100 percent stake or over 632.49 crore shares in LIC.
According to the sources, the government has time till May 12 to launch the LIC IPO without filing fresh papers with Sebi. “We have a window till May 12 to launch the IPO based on the papers filed with SEBI. We are watching the volatility and will file the RHP giving the price band soon,” an official had told CNBC-TV18.
The DHRP was filed on February 13. With a five per cent stake dilution, the LIC IPO will be the biggest ever in the Indian stock market’s history and once listed, LIC’s market valuation would be comparable to top companies like RIL and Tata Consultancy Services (TCS).
The company’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.
To meet a disinvestment target of Rs 78,000 crore in the current financial year, the government expects to mop up Rs 63,000 crore by selling a five percent stake in the life insurance firm. The amount mobilised from Paytm’s IPO in 2021 has been the largest so far at Rs 18,300 crore. It was followed by Coal India (2010) at nearly Rs 15,500 crore and Reliance Power (2008) at Rs 11,700 crore.
LIC’s profit after tax increased to Rs 234.91 crore in the December 2021 quarter from Rs 0.91 crore a year earlier, according to the insurer’s website. Profit for the nine months ended December 2021 also climbed to Rs 1,642.78 crore from Rs 7.08 crore a year earlier.
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