Stage set for historic LIC IPO! Govt files DRHP to sell 5% for ₹63,000 cr

An initial public offering of over 316 crore shares or 5 per cent government stake is likely to hit D-Street in March and insurance sector employees and policyholders will get a discount on the floor price.

As per the draft red herring prospectus, the embedded value of LIC, which is a measure of the value of consolidated shareholders in an insurance company, is pegged at approx. 5.4 lakh crore by international actuarial firm Milliman Advisors till September 30, 2021. Though DRHP does not disclose the market valuation of LIC, as per industry standards it would be around or around 3 times the embedded value. 16 lakh crore.

Tuhin Kanta Pandey, Secretary, Department of Investment and Public Asset Management (DIPAM), tweeted, “DRHP of LIC IPO has been filed with SEBI today. Approx 316 crore shares representing 5 per cent equity on offer for valuation filing Huh.”

Merchant banking sources said that the government expects 63,000 crore (approximately USD 8 billion) from the IPO. IPO is an offer for sale (OFS) by the Government of India and there is no fresh issue of shares by Life Insurance Corporation (LIC). The government has 100 percent stake or more than 632.49 crore shares in LIC. The face value of the shares is 10 per.

LIC IPO will be the biggest IPO in the history of Indian stock market and once listed the market valuation of LIC will be at par with top companies like RIL and TCS. Till date, the amount raised from Paytm’s IPO in 2021 was the largest ever 18,300 crore, followed by Coal India (2010) approx. 15,500 crore and Reliance Power (2008). 11,700 crores.

“LIC has 66 per cent market share in new business premium with 283 million policies and 1.35 million agents as of March 31, 2021,” Pandey said. However, the government did not disclose the exemption in DRHP that would be given to the policyholders. or LIC employees in a public offering.

As per the rules, up to 5 per cent of the issue size can be reserved for employees and up to 10 per cent for policyholders. LIC’s IPO is expected by March and will be crucial to meet the revised disinvestment target of proceeds 78,000 crore in the current financial year. So far, the government has raised 12,030 crore in this financial year through disinvestment of CPSEs and strategic sale of Air India.

The share capital of Life Insurance Corporation (LIC) was raised from 100 crore 6,325 crore during September last year to facilitate the IPO. Last month, LIC reported profit after tax of 1,437 crore for the first half of the financial year 2021-22 as compared to 6.14 crore in the year-ago period.

Its new business premium growth rate stood at 554.1 per cent in the first half of 2021-22, as against 394.76 per cent in the year-ago period. At present there are 24 life insurance companies in India, of which LIC is the only public company.

The size of the Indian life insurance industry was 6.2 lakh crore on the basis of total premium in FY 2021, up from 5.7 lakh crore in FY 2020. The government has appointed 10 merchant bankers including Kotak Mahindra Capital, Goldman Sachs (India) Securities Pvt Ltd, Citigroup Global Markets India Pvt Ltd and Nomura Financial Advisory and Securities (India) Pvt Ltd to manage the business. Mega IPO of the country’s largest insurance company. The government is also considering allowing foreign investors to take stake in LIC.

As per SEBI regulations, Foreign Portfolio Investors (FPIs) are allowed to buy shares in a public offering. FDI policy for FII/FPI investment in this IPO will have to be changed, as LIC is a corporation and not an insurance company. The Cabinet Committee on Economic Affairs had approved the proposal for IPO of LIC in July last year.

This story has been published without modification in text from a wire agency feed. Only the title has been changed.