The Board of Life Insurance Corporation (LIC) of India is learnt to have agreed on diluting 3.5% stake in the country’s largest insurer, even as it keeps the 5% stake dilution as an upward limit, as filed in the draft red herring prospectus.
A senior official aware of the development, the Board in a meeting on Saturday, decided on reducing the stake for dilution, which will be subject to regulatory approvals, amid headwinds from volatile stock markets and investor interest, even as it could dilute up to 5% stake as stated in the prospectus.
“The 5% limit is still on the table. As per the demand at the moment, markets can support about 3.5%, but if it changes, we can easily increase it to 5%,” the official said, asking not to be named as the proceedings are not in public domain.
The government is seeking to garner between ₹21,000- ₹30,000 crore from the sale, at a valuation of ₹6 trillion, the official added.
While IPO is expected to be taken to the markets in the first week of May, reservations, discounts and issue price will be ascertained by Wednesday morning. Queries to the finance ministry did not elicit a response as of Saturday late evening.
The largest IPO to come to the Indian stock markets will therefore take place well before its deadline of May 12 after which it will have to refile the DRHP with March quarter results.
Tuhin Kanta Pandey, the secretary for the department of investment and public asset management (Dipam), said last month at the Mint India Investment Summit 2022 that there is strong investor interest in the state-run company’s offer, but the Centre will proceed with the IPO only when it is confident of successfully listing the insurer.
The success of LIC’s IPO is crucial for the government to meet its asset sales goal, which has been cut to a modest ₹65,000 crore target for the current fiscal, lower than the revised ₹78,000 crore for the previous fiscal. The government could meet less than 17% of the revised asset sales target for FY22 as the Russian invasion of Ukraine, and the ensuing volatility in stock markets forced it to postpone the LIC share sale to this fiscal year.
However, delaying the IPO beyond 12 May will mean delaying the IPO by two to three months.
Mint reported earlier this week that the country’s largest insurer put up a stellar performance with first-year premium collection, a key metric, rose 7.9% to ₹1.98 trillion for the year ended 31 March, with a market share of 63.25%, lower than the previous year. However, in March, the company’s premium collections grew 51% to ₹42,319.22 crore from a year earlier, garnering a market share of 71%. LIC sold 21.7 million insurance policies in the year ended 31 March, 3.54% more than the previous fiscal, boosting its market share to 74.6% in terms of policies sold.
The mega IPO has drawn significant interest from at least 12 large foreign and domestic fund management firms, Mint reported last week. At least five of India’s top asset management companies, at least three large foreign sovereign funds, two global pension fund management companies and two global hedge funds have committed to invest ₹18,000 crore to bankers managing the LIC IPO, the report said. Mint had also reported that domestic mutual funds are likely to invest ₹7,000-8,000 crore as anchor investors.