The situation is becoming clear with the much-awaited IPO of public sector insurance company LIC. The government on Monday submitted the revised draft of the IPO (updated DRHP) to the market regulator SEBI. Then today the board meeting of the Government Insurance Company (LIC Board) is going to be held. In the revised draft, the government has reduced not only the valuation of LIC but also the size of the IPO. However, the terms regarding the issue price band of the issue are not yet clear.
Biggest IPO despite being small
The IPO of Life Insurance Corporation will open for retail investors on May 4. The IPO will be open for bidding till May 9, but an official announcement is yet to be made. LIC’s IPO for anchor investors will open on May 2. It will be officially sealed in today’s board meeting. The government is planning to raise Rs 21,000 crore through this IPO. In this way, this first issue of LIC is going to become the biggest IPO in the history of India.
This is the new value of LIC
Although earlier this IPO was being estimated to be bigger. Earlier it was believed that the government would try to sell its 10 per cent stake in the IPO. Later, when the first draft was presented, the government sought approval from SEBI to sell 5 per cent stake. The government has now also reduced the valuation of LIC. LIC is now worth Rs 6 lakh crore. This is about 1.1 times the embedded value.
The sales environment has made the size so small
The sell-off in the stock market in the last few months has had a profound effect on LIC. Not only is it coming back months later but its size has also been reduced several times. The government wanted to bring this IPO before March 31, 2022, to meet its disinvestment target. The period of sales dominates the market after the start of the war between Russia and Ukraine. Due to this the government also lowered the disinvestment target and postponed the much-awaited IPO of LIC. Earlier it was thought that the size of the IPO could range from Rs 80,000 crore to Rs 1 lakh crore. Now its size is 4-5 times smaller than the initial estimate.
So much reserve for employees, policyholders
According to the updated DRHP, this IPO will have a maximum reserve of 5 per cent for LIC employees. Similarly, a maximum of 10 percent of the IPO will be reserved for the policyholder of the company. LIC’s board had last week approved the sale of 3.5 per cent stake in the government. That is, about 22.14 crore shares. Earlier, when the government submitted the first draft to SEBI, there was talk of selling 5 per cent stake i.e. 31.62 crore shares.
This could be the price band of LIC IPO
According to the available information, the price band of LIC’s IPO can be around Rs 950. However, its official information is yet to come. A government official said that if the market conditions improve in the coming days, the size of LIC’s IPO could be increased by up to 5 per cent. Apart from this, it is not yet clear what will be the lot size of this IPO.