LIC IPO: The central government is all set to file the draft papers of initial public offering (IPO) of Life Insurance Corporation of India (LIC) with market regulator by this week, according to various reports. The embedded value of India’s largst IPO has been finalised over Rs 5 lakh crore. Tuhin Kanta Pandey, Secretary to the Department of Investment and Public Asset Management (DIPAM) earlier said that the draft prospect will be filed once the insurance regulator gives a green signal for India’s biggest-ever IPO. The size of the issue will be mentioned in the draft paper, Pandey added.
A portion of the much-awaited LIC IPO will be reserved for the anchor investors. Around 10 per cent of the LIC IPO would be set aside for the LIC poilcyholders, Pandey added.
LIC IPO Date
The government is likely to file the Draft Red Herring Prospectus (DRHP) of LIC IPO with Securities and Exchange Board (Sebi) on Thursday or Friday, Pandey said in an interview with the Financial Express. Pandey earlier mentioned that the approval for LIC IPO could come quickly after filing the draft papers as the preparatory work has been done in consultation with Sebi. LIC IPO is expected to hit the stock market by March.
LIC IPO Valuation
“I would say the embedded value could be more than Rs 5 lakh crore and the enterprise value will be multiples of that,” Pandey recently said in an interview with Reuters. The valuation of LIC IPO will be around three to five times the embedded value. So, the valuation of mega LIC IPO could be around Rs 15 lakh crore. The LIC IPO will be crucial to meet the central government’s disinvestment target. It will also help the government to bring down fiscal deficit target of 6.9 per cent of GDP for FY22 by a notch.
LIC IPO Size:
The central government has lowered the disinvestment target for the current financial year to Rs 78,000 crore. It was estimated at Rs 1.75 lakh crore during Budget 2021. So far, the government has garnered a little over Rs 12,000 crore from divestments this fiscal. So, the Centre is relying on LIC IPO to meet the disinvestment target.
At over Rs 15 lakh crore valuation, a 5-10 per cent stake sale could fetch up to Rs 1.5 lakh crore. The government may sell up to 10 per cent share of LIC IPO, according to sources. However, Pandey declined to comment the size of stake government is planning to offload in the first round.
LIC IPO for Anchor Investors, Policyholders and Foreign Investors
To ensure the success of this mega IPO, the central government is in process to rope in foreign investors. The government has been considering a proposal for foreign investors to own as much as 20 per cent in LIC, according to sources. For this, the government is in the process to amend FDI rules so that the investors can pick up the stake without government’s permission under automatic route.
LIC has approached anchor investors to raise about Rs 25,000 crore before the IPO, according to ET Now. For policyholders, the government would reserve 5-10 per cent at a discounted rate, the sources mentioned.
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