Market regulator SEBI Life Insurance Corporation (LIC) has approved the mega IPO proposal to help the government raise about Rs 63,000 crore to meet its investment target for the current financial year, sources said. SEBI has approved the draft Red Herring Prospectus (DRHP) filed by LIC on February 13, 2022, sources said.
The move from the Securities and Exchange Board of India (SEBI) came in less than a month, the fastest for any company.
Through DRHP, 31.6 crore shares or 5 per cent shares of the government will be sold in the initial public offering (IPO). Insurance Behemoth employees and policyholders will also get a discount on the floor price.
LIC’s embedded value, a measure of shareholder value in an insurance company, has been set at around Rs 5.4 lakh crore by September 30, 2021 by the international actuarial firm Milliman Advisors.
Although DRHP does not disclose the market value of LIC, according to industry standards, it will be about 3 times the embedded value or about Rs 16 lakh crore.
The IPO will not be an offer for sale (OFS) by the Government of India and no new issue of shares by LIC. The government has 100 per cent stake in LIC or more than 632.49 crore shares. The face value of the shares is Rs. 10 per share.
The LIC IPO will be the largest IPO in the history of the Indian stock market and once listed, the market valuation of LIC will be comparable to that of top companies like RIL and TCS. So far, the highest amount collected from Paytm’s IPO in 2021 was Rs 18,300 crore, followed by Coal India (2010) at around Rs 15,500 crore and Reliance Power (2008) at Rs 11,700 crore.
As a rule, up to 5 per cent of the issue size may be reserved for employees and up to 10 per cent for policyholders. The funds are expected to meet LIC’s IPO by March and revised investment target of Rs 78,000 crore for the current financial year. So far, the government has raised Rs 12,030 crore in this financial year through CPSE disinvestment and strategic sales of Air India.
LIC’s share capital was raised from Rs 100 crore to Rs 6,325 crore in September last year to facilitate IPOs. Last month, LIC reported a post-tax profit of Rs 1,437 crore for the first half of 2021-22, up from Rs 6.14 crore in the year-ago period. Its new business premium growth rate stood at 554.1 percent in the first half of 2021-22, compared to 394.76 percent in the previous year.
There are currently 24 life insurance companies in India, of which LIC is the only public player. The size of the Indian life insurance industry was Rs 6.2 lakh crore on a total-premium basis in FY 2021, which increased to Rs 5.7 lakh crore in FY 2020.
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