‘The government is currently on a wait-and-see stance due to market volatility caused by the Russia-Ukraine war and will decide on the timing of Life Insurance Corporation’s IPO’
‘The government is currently on a wait-and-see stance due to market volatility caused by the Russia-Ukraine war and will decide on the timing of Life Insurance Corporation’s IPO’
The government plans to file the final papers for LIC’s IPO shortly with market regulator SEBI, which will provide details on the price range, the rebate for policyholders and retail buyers and the actual number of shares to be put on the block, said an official.
The government is currently on a wait-and-see stance due to market volatility caused by the Russia-Ukraine war and will decide on the timing of the initial public offering (IPO) of Life Insurance Corporation (LIC).
“We have received approval of the DRHP and the next step would be to file the RHP which will detail the price range and actual share count. We are monitoring the situation and will take a call soon on the timing of the stock sale,” an official told PTI.
LIC filed the draft Red Herring prospectus (DRHP) for LIC’s IPO on February 13. Earlier this week, SEBI approved the paper drafts, paving the way for the stock sale.
The government had expected to earn more than ₹60,000 crore by selling about 31.6 crore, or 5% stake, in the life insurance company to meet its restricted divestment target of ₹78,000 crore in the current fiscal year.
If the first share sale does not occur by March, the government will fall well short of its revised divestment target for the current fiscal year.
According to the draft prospectus, the embedded value of LIC, which is a measure of an insurance company’s consolidated shareholder value, was determined by international actuarial firm Milliman Advisors to be approximately 5.4 lakh crore as of September 30, 2021.
Although the DRHP does not disclose the market valuation of LIC, by industry standards it would be approximately three times the embedded value.
At a 5% share dilution, LIC’s IPO would be the largest in the history of the Indian stock market and once listed, its market valuation would be comparable to top companies such as RIL and TCS.
So far, the amount mobilized from Paytm’s IPO in 2021 was the largest ever at 18,300 crore, followed by Coal India (2010) at almost 15,500 crore and Reliance Power (2008) at 11,700 crore.
However, the government has not disclosed in the DRHP the rebate given to policyholders or LIC employees as part of the public offering. According to the norms, up to 5% of the issue volume can be reserved for employees and up to 10% for policyholders.
For the broader market, ₹12,423.67 billion has been raised through OFS, employee OFS, strategic divestments and buybacks in the year to date.
