The Life Insurance Corporation of India (LIC) filed its IPO papers with the Securities and Exchange Board of India (SEBI) on Sunday. As per the draft red herring prospectus (DRHP) for the proposed initial public offering, LIC’s offer is entirely an offer for sale (OFS) of 316,249,885 by the shareholder, President of India, acting through the Ministry of Finance, Government of India. This means the government would sell 5 percent stake via the IPO.
The government owns 100 percent in LIC, whose total equity is around 632 crore shares. The government, while targeting Rs 1.75 trillion receipts for this year, had expected completion of big ticket privatisation proposals. Now that target has been slashed to ₹78,000 crore. The government had earlier planned to raise Rs 800-900 billion from stake sale in LIC.
CNBC-TV18 had earlier reported on the LIC’s plans to file the IPO paper with SEBI today. LIC’s board met on Friday to consider the proposed mega IPO of the state-run insurance behemoth.
“The IPO is 100 percent OFS by the government of India and no fresh issue of shares by LIC. For filing valuation about 31.6 crore shares are on offer representing 5 percent equity,” Department of Investment and Public Asset Management (DIPAM) secretary tweeted on Sunday.
“LIC has 66 percent market share in new business premiums with 283 million policies and 1.35 million agents as of March 31, 2021. Embedded value of LIC as on September 30, 2021, is Rs 5,39,686 crore (about Rs 5.4 trillion),” added the tweet by DIPAM secretary.
However, the DRHP does not give any clarity on reservation or discount for policyholders. Though not finalised, policyholder reservation cannot exceed 10 percent while employee reservation cannot exceed 5 percent.
At least 35 percent of offer is reserved for retail investors, as per the DRHP. Not more than 50 percent of the offer shall be allocated on a proportionate basis to QIB (qualified institutional buyer) , says the DRHP. It may allocate up to 60 percent of QIB portion to anchor investors on a discretionary basis. One-third of the anchor investor portion shall be reserved for domestic mutual funds.
“In the event of under-subscription, or non-allocation in the Anchor Investor Portion, the balance equity shares shall be added to the net QIB portion,” it reads.
Further, 5 percent of the net QIB portion shall be available for allocation only to mutual funds while the remainder shall be available for allocation to all.
Not less than 15 percent of the offer shall be available for allocation to non-institutional bidders, it says.
“Our corporation is a Domestic Systemically Important Insurer and a financial conglomerate, which subjects our corporation to enhanced regulatory supervision measures,” it said.
Insurance regulator IRDAI had approved the LIC IPO on February 9.
FY22 has not been a great year for the life insurance behemoth so far. LIC has lost market share of 500 basis points to the private life insurance industry in the first 10 months of FY22.
LIC has 29 crore policyholders and more than 13 lakh agents, according to AngelOne.
Earlier, LIC had made a public announcement asking policyholders to update their Permanent Account Number (PAN) details and open demat accounts to participate in the proposed public issue.
First Published: IST