India’s largest insurance sector company LIC is expected to launch its much-awaited initial public offering (IPO) by the end of this month. The government is now also planning to cut its valuation by 30 per cent to make it more attractive, according to a Mint report. The Centre is now looking at a valuation of around Rs 11 lakh crore from the IPO as compared with Rs 16 lakh crore earlier. Here’s what investors need to know about the upcoming mega IPO:
What Will Be The Size Of The IPO?
The government aims to raise around Rs 60,000 crore by selling its 5 per cent stake in the state-owned company. However, the Centre is also mulling over raising the size of the LIC IPO. After discussing with investment bankers, the government may file an updated draft red herring prospectus (DRHP) with markets regulator Sebi soon.
The government last month filed fresh draft papers for the IPO. Currently, the government has time till May 12 to launch the offer, failing which the Centre will need to file fresh papers with the Securities and Exchange Board of India, give the results of the December quarter and also update the embedded value. However, the government now plans to launch the offer by the end of this month.
LIC’s embedded value stood at Rs 5.39 lakh crore as of September 31, 2022, according to draft papers. The valuation of LIC IPO is likely to be three-five times the embedded value. The IPO was earlier planned to be launched by March in the last financial year 2021-22 but the high volatility in the markets due to the Russia-Ukraine war derailed the plan.
Around half of the IPO issue has been fixed for the qualified institutional buyers (QIB), while about 15 per cent will be earmarked for non-institutional investors (NII). Retail investors can participate in 35 per cent of the offer. One-third of the anchor investor portion will be reserved for domestic mutual funds.
A significant portion will also be reserved for the policyholders and it should not exceed 10 per cent of the public issue. For employees also, 5 per cent of LIC IPO will be reserved. Both the employees and policyholders will get a chance to book LIC IPO at a discounted rate.
LIC might explore cross-selling products through its housing finance arm LIC Housing Finance. This will help strengthen yet another channel of LIC for selling its policies, according to a report by Business Standard. Quoting a senior government official, the report said the Centre has informed investors during road shows that LIC would look at cross-selling its policies.
LIC To Be The Biggest IPO
The LIC IPO will be the biggest IPO ever in India. Till now, Paytm IPO is the biggest one at Rs 18,300 crore in 2021, followed by Coal India Ltd at Rs 15,500 crore in 2010 and Reliance Power at Rs 11,700 crore in 2008.