- The government has till May 12 to launch LIC IPO without submitting new documents to market regulator SEBI.
- LIC IPO launch was planned in March but delayed due to Russia-Ukraine war
- If the government misses the May 12 window, LIC will have to file new documents with SEBI
The government has until May 12 to launch LIC’s initial public offering (IPO) without submitting new documents to market regulator SEBI, an official said.
The sale of about 31.6 crore shares of the government or 5 per cent stake in Life Insurance Corporation (LIC), estimated to bring about Rs 60,000 crore to the exchequer, was originally planned to be launched in March, but the Russia-Ukraine crisis derailed plans as stock markets were extremely volatile. .
On 13 February, the government submitted a draft Red Herring Prospectus (DRHP) for IPO to SEBI, which approved it last week.
“We have a window till May 12 to launch the IPO based on the documents filed with SEBI. We are seeing instability and will soon file an RHP to pay the price band,” an official said.
The DRHP filed with Sebi also contained details of LIC’s financial results and the price embedded until September 2021.
If the government misses the window available with May 12, LIC will have to file new documents with SEBI and update the embedded values in order to report the December quarter results.
LIC’s embedded value, which is a measure of shareholder value in an insurance company, was set at around Rs 5.4 trillion by the international actuarial firm Milliman Advisors as of September 30, 2021.
Although DRHP does not disclose the market value of LIC, according to industry standards it will be about 3 times the embedded price.
The official added that although market volatility has eased over the past fortnight, it will wait for the market to become more stable so that retail investors can gain confidence to invest in the stock. LIC has reserved up to 35 percent of its total IPO size for retail investors.
“A portion of the reserve reserved for retail investors needs about Rs 20,000 crore to come from retail buyers. Based on our market valuation, the current retail demand is not enough to bid for a full share quota,” the official said.
The government expects to earn more than Rs 60,000 crore by selling about 31.6 crore or 5 per cent stake in the life insurance firm to meet the investment target of Rs 78,000 crore in the current financial year.
If the shares are not sold by March, the government will miss the revised investment target by a wide margin.
At 5 per cent stake dilution, LIC IPO will be the largest in the history of Indian stock market and once listed, LIC’s market valuation 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.
The government, however, has not disclosed the discounts that will be given in the public offer of policyholders or LIC workers in DRHP.
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.
So far in the current financial year, Rs 12,423.67 crore has been raised through OFS, Employee OFS, Strategic Investments and Buyback.
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