The much-awaited initial public offering of Life Insurance Corporation (LIC) of India will take place between the price band of ₹902 and ₹949, with ₹60 discount for policyholders and ₹45 discount for employees.
According to officials aware of the decision taken during a high-level meeting on Tuesday, the government will pare 3.5% stake through 22.13 crore shares, where 2.2 crore shares will be reserved for policyholders and 0.15 crore shares for employees.
The IPO will open on May 2 for anchors and for other investors from May 4 till May 9.
“After the reservations, remaining shares to be allocated in the ratio of 50% to qualified institutional buyers, 35% to retail investors and 15% to non-institutional investors,” the official said, asking not to be named. “60% of QIBs share is reserved for anchor investors,” he added.
Mint had reported on Tuesday that the IPO had received ₹13,000 crore worth of investment commitments from anchor investors, more than twice the value of shares offered to such investors.
The government’s stake sale in India’s largest insurer is still much lower than the at least 5% stake sale it had originally planned. Geopolitical tensions, soaring oil prices and monetary tightening by major central banks have made global investors skittish about emerging markets stocks, crimping demand for LIC’s shares.
Waning investor demand after Russia’s invasion of Ukraine has also squeezed valuations.
The government has decided not to divest more than 3.5% stake for at least a year from the listing date, which will give adequate time for the stock to come to its market determined value post listing.
Though the commitments from anchor investors stand at around ₹13,000 crore, the final allotment to anchor investors will be around ₹6,300 crore as the issue size has been slashed by the government to a little more than ₹21,000 crore.
anchor investors who do not get enough shares during the anchor allotment can separately procure more shares of LIC from the qualified institutional buyers’ quota, which will offer shares worth at least ₹10,500 crore.
LIC’s IPO will be the first in the country to offer merely a 3.5% stake to the public, lower than the 5% regulatory minimum stipulated by the Securities and Exchange Board of India (Sebi).
LIC is valued at ₹6 trillion, which is just 1.1 times its original embedded value of ₹5.39 trillion, according to the revised estimates of the government.
Since the government will be selling a 3.5% stake in LIC during the IPO, the insurer may be given an exemption from complying with Sebi’s rule that requires publicly traded companies to achieve a minimum public shareholding of 25% in five years.
The government and Sebi are currently discussing ways to relax the norm on minimum public shareholding for LIC, and according to the current discussions, LIC may be given more than five years, as a special exemption, to achieve the minimum public shareholding target,
On 13 April, Mint first reported that the government had slashed the valuation it is seeking for LIC to make the initial share sale attractive.
Mint reported last week that the country’s largest insurer reported a stellar performance, with the first-year premium collection, a key metric, rising 7.9% to ₹1.98 trillion for the year ended 31 March.
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.