Markets regulator SEBI has approved Life Insurance Corporation’s (LIC) mega IPO proposal to help the government raise around Rs 63,000 crore to meet its disinvestment target for the current fiscal. Sources said Sebi has given its approval to the draft Red Herring Prospectus (DRHP) filed by LIC on February 13, 2022.
The Securities and Exchange Board of India’s (SEBI) approval has come in less than a month, the fastest for any company.
According to the DRHP, the initial public offering (IPO) will involve sale of 31.6 crore shares or 5 per cent of the government’s stake. Also, employees and policyholders of the insurance giant will get a discount on the floor price.
LIC’s embedded value, which is a measure of the consolidated shareholders’ value in an insurance company, has been pegged at around Rs 5.4 lakh crore by international actuarial firm Milliman Advisors as of September 30, 2021.
Though DRHP does not disclose the market valuation of LIC, by industry standards, it would be around 3 times the embedded value or around Rs 16 lakh crore.
The IPO is an offer for sale (OFS) by the Government of India and there will be no fresh issue of shares by LIC. The government has 100 percent stake or more than 632.49 crore shares in LIC. The face value of the shares is Rs 10 per share.
LIC IPO will be the biggest IPO in the history of Indian stock market and once listed, the market valuation of LIC will be at par with top companies like RIL and TCS. So far, the amount raised from Paytm’s IPO in 2021 was the biggest ever at Rs 18,300 crore, followed by Coal India (2010) at around Rs 15,500 crore and Reliance Power (2008) at Rs 11,700 crore.
As per the rules, up to 5 per cent of the issue size can be reserved for employees and up to 10 per cent for policyholders. LIC’s IPO is expected by March and the proceeds will be crucial to meet the revised disinvestment target of Rs 78,000 crore for the current fiscal. So far this financial year, the government has raised Rs 12,030 crore through disinvestment of CPSEs and strategic sale of Air India.
The share capital of LIC was increased to Rs 6,325 crore from Rs 100 crore during September last year to facilitate the IPO. Last month, LIC reported a profit after tax of Rs 1,437 crore for the first half of 2021-22, as against Rs 6.14 crore in the year-ago period. Its new business premium growth rate stood at 554.1 per cent in the first half of 2021-22, as against 394.76 per cent in the year-ago period.
There are currently 24 life insurance companies in India, of which LIC is the only public company. The size of the Indian life insurance industry stood at Rs 6.2 lakh crore on a total premium basis in FY21, up from Rs 5.7 lakh crore in FY20.
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