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The government proposes to scale down the size of the Initial Public Offering (IPO) of Life Insurance Corporation of India (LIC) by 1.5 percentage point or around 9.4 crore shares. The issue is expected to hit the market early next month.
Sources told BusinessLine that the board of the insurance behemoth met on Saturday and approved the issue size at 3.5 per cent. In terms of absolute numbers, it comes to around 22.14 crore shares. Earlier, in the Draft Red Herring Prospectus (DRHP), filed with SEBI on February 13, the government had proposed offering 31.62 crore shares which was around 5 per cent of total number of equity shares.
“Revised size is subject to regulatory approvals,” a highly-placed source said while adding that the IPO is likely to hit the market in the first week of May. “Reservations, discounts, issue dates and issue price will be known by Wednesday morning,” the source said.
LIC’s embedded value, which is a measure of the consolidated shareholders’ value in an insurance company, was pegged at about ₹5.4-lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors.
Pain points
It has already been estimated that the Ukraine-Russia conflict, withdrawal by Foreign Portfolio Investors (FPI) from emerging economies like India and rising inflation along with interest rates globally, are some of the important factors weighing on the decision-making process of LIC IPO. “It is a tough call to decide whether to go ahead with the retail and domestic investor demand or to wait for geopolitical tension to ease and FIIs to return to market but now we are going ahead,” the official source said.
The DRHP has already mentioned that the employee reservation portion will not exceed 5 per cent of post-Offer Equity Share capital. Also, the policyholder reservation portion will not exceed 10 per cent of the offer size.
On Friday, BusinessLine had reported, quoting government officials, that the objective of the LIC IPO is to get the life insurance behemoth listed on the bourses rather than mobilising money. Earlier, the government planned to bring the issue before the end of March. However, the Russia-Ukraine conflict derailed the plan. Now, the government has time till May 12 to launch the IPO without filing fresh papers with markets regulator SEBI. For this, it needs to file the red herring prospectus with the regulator by next week.
LIC IPO is expected to contribute a major chunk to the budgeted disinvestment proceeds in the current fiscal year. The government has pegged disinvestment receipts at ₹65,000 crore for 2022-23 — up from ₹13,531 crore last fiscal year.
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