The Union government submitted the draft red herring prospectus (DRHP) of India’s state-owned Life Insurance Corporation with market regulator SEBI on February 13 to launch the much-anticipated initial public offering (IPO) by the end of March. The offer is expected to assist the government in meeting its revised disinvestment target of Rs 78,000 crore for the fiscal year, as well as attract a large number of new retail investors.
Notably, the DRHP initially makes no mention of the issuance amount or the pricing because it talks with investors. The government is making a 100 percent offer for sale, with no new LIC shares being issued. Around 31.6 crore shares, or 5% of the company’s ownership, are up for grabs.
The embedded value (a statistic used by life insurance companies that represents the total of the present value of all future profits from the existing business plus shareholders’ net worth) has been noted and is estimated to be around Rs 5.39 lakh crore as of September 30, 2021. The enterprise value would increase the embedded value.
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LIC had 66 percent market stake in the latest business premiums with 283 million policies and 1.35 million agents as of March 31, 2021. Clearness on potential discounts for policyholders, employees and others is probable to be provided nearer to the launch of the corporation’s IPO.
The LIC IPO is largely predicted to be the largest ever in the history of the domestic capital markets, based on final conversations with investors. With its Rs 18,300-crore IPO in November, Paytm set a new record for the largest domestic IPO. Coal India had previously held the record, having collected roughly Rs 15,000 crore through an IPO in 2010. Saudi Aramco, the state-owned oil company of Saudi Arabia, raised $25.6 billion in the world’s largest-ever initial public offering (IPO) in December 2019.
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Kotak Mahindra Capital, JP Morgan, Citi, BofA Securities, Nomura, ICICI Securities, Axis Capital, JM Financial, Goldman Sachs, and SBI Caps were among the ten merchant bankers appointed by the government for the IPO in September. Cyril Amarchand Mangaldas and Shardul Amarchand Mangaldas are the legal advisors.
According to draft papers submitted with the capital markets regulator Sebi, Life Insurance Corporation of India has set aside up to 35 percent of the overall IPO size for retail investors. Qualified institutional buyers will receive half of the offer size, while non-institutional investors will receive 15%.
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In addition, the corporation may allocate up to 60% of the QIB part to anchor investors on a discretionary basis, with one-third designated for domestic mutual funds in consultation with merchant bankers.
“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,” stated LIC in its DRHP.
Equity shares are proposed to be listed on the BSE and NSE of India.
