Retail investors are likely to have the opportunity to bid for a higher portion of the initial public offering of Life Insurance Corporation of India. Sources close to the development said about a third of the offer may be reserved for retail investors.

“While 10 per cent of the offer is expected to be reserved for eligible policyholders, overall about 30 per cent would be reserved for retail bidders including employees of LIC as well as policyholders,” the source said.

The life insurance behemoth is expected to file its draft red herring prospectus(DRHP) with SEBI shortly. Its mega IPO is scheduled to be completed this fiscal by March 31.

The quantum of stake to be divested by the Centre will be in the DRHP but sources indicated that it may be less than 10 per cent. “The government may choose to divest only 5 per cent of its stake for now,” the source said.

LIC’s net worth is estimated at over ₹8,000 crore as on September 30, 2021. Under the LIC Act, the “Centre’s shareholding in the life insurer cannot fall below 51 per cent.

Significantly, the Act also states that no person, other than the Central Government, acting individually or in a group, can hold equity shares in excess of five per cent of the issued equity share capital of LIC, or such higher percentage as notified by the Centre.

Ceiling on investment

Sources said this could possibly restrict the ability of investors to invest over 5 per cent in the listing. The DRHP is expected to clarify on this issue as well. It would also include the embedded value and valuation for the life insurer.

Finance Minister Nirmala Sitharaman had said in the Union Budget 2022-23 that the LIC IPO is expected shortly. LIC is the largest life insurer in the country and continues to hold over 61 per cent market share and is the largest asset manager in the country.

As at Sept 30, 2021, LIC had 13.43 lakh individual agents, 72 bancassurance partners, 175 alternate channel partners and 3,463 micro insurance agents.

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