The government has filed a fresh draft red herring prospectus (DRHP) with markets regulator Sebi for the LIC IPO and is likely to file red herring prospectus (RHP) in the first half of next week. The Securities and Exchange Board of India’s (Sebi) approval on Life Insurance Corporation‘s (LIC) updated DRHP is expected on Monday, sources have told CNBC-TV18.
The initial public offering of Life Insurance Corporation (LIC) is expected to hit the market in the first week of May and its board has also approved reducing the issue size. In the LIC IPO, the government has now decided to dilute its 3.5 per cent stake for Rs 21,000 crore, compared with the 5 per cent proposed in the draft papers.
The government is likely to price LIC IPO at Rs 950-1,000 per share. The initial public offering is expected To value LIC at around 1.1X price/ embedded value.
The proposal to reduce the IPO’s size to 3.5 per cent, from the 5 per cent proposed earlier, was tabled and approved at a board meeting on Saturday. Here’s what we know about the IPO so far:
LIC IPO Size
In its draft red herring prospectus, state-owned LIC informed that the government will offload its 5 per cent stake through the IPO. Now, the stake dilution has been reduced to 3.5 per cent for Rs 21,000 crore, valuing the country’s largest insurer at Rs 6 lakh crore. The IPO is also likely to have a greenshoe option of Rs 9,000 crore.
A greenshoe option is an over-allotment option. The option gives the company a choice to retain excess subscription and helps it adjust the public issue as per demand and market conditions.
LIC IPO Date
The initial public offering is likely to hit the market in the first week of May, government sources have told CNBC-TV18. Last month, the government filed fresh draft papers for the IPO. The Centre now has time till May 12 to launch the offer, after which the Centre will need to file fresh papers with markets regulator Sebi. It will also need to declare the results of the December quarter and also update the embedded value. The embedded value of LIC was Rs 5.39 lakh crore as on September 31, 2021, according to draft papers.
LIC IPO Reserved Quota
Retail investors will be eligible to participate in about 35 per cent of the IPO issue size and about 15 per cent will be reserved for non-institutional investors. Around half of the IPO issue has been fixed for qualified institutional buyers (QIBs). Out of the QIB’s portion, 60 per cent has been earmarked for anchor investors on a discretionary basis.
One-third of the anchor investor portion will be reserved for domestic mutual funds. A significant portion, not exceeding 10 per cent of the public issue, will also be reserved for the policyholders. 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.
Biggest IPO So Far
Even after the reduced size of Rs 21,000 crore, the LIC IPO is going to be the biggest initial public offering ever in the country. Till now, the IPO of Paytm 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.
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