HomeMoney & FinanceCentre to file final papers for LIC IPO with Sebi soon: Report

Centre to file final papers for LIC IPO with Sebi soon: Report

The Centre is planning to soon file the final papers for state-owned Life Insurance Corp’s (LIC) initial public offering with market regulator Sebi, which will provide information about the price band, discount for policyholders and retail buyers, and the actual number of shares to be put on the block.

The Centre is currently in the wait-and-watch mode because of the market volatility after Russian President Vladimir Putin authorised what he called a “special military operation” on Ukraine.

The government will likely decide on the timing of the IPO of LIC. “We have got the approval of the DRHP and the next step would be to file the RHP, which will give details of the price band and the actual number of shares. We are watching the situation, and soon we will take a call on the timing of the share sale,” an official told news agency PTI.

Two days back, Sebi had approved the mega IPO proposal of LIC to help the government mobilise about 63,000 crore to meet the disinvestment target for the current fiscal year.

LIC had, on 13 February, filed the draft red herring prospectus (DRHP) for LIC IPO. Earlier this week, Sebi gave approval to the draft papers, paving the way for the share sale.

The Centre was expecting to garner over 60,000 crore by selling about 31.6 crore or 5 per cent shares in the life insurance firm to meet the curtailed disinvestment target of 78,000 crore in the current financial year.

In case the initial share sale does not happen by March, the government will miss its revised disinvestment target for the current fiscal by a wide margin.

As per the draft prospectus, LIC’s embedded value, which is a measure of the consolidated shareholders’ value in an insurance company, was pegged at about 5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors.

Although the DRHP does not disclose the market valuation of LIC, as per industry standards it would be about 3 times the embedded value.

At a 5 per cent stake dilution, the LIC IPO would be the biggest ever in the history of the Indian stock market and once listed, its market valuation would be comparable to top companies like RIL and TCS.

So far, the amount mobilised from the IPO of Paytm in 2021 was the largest ever at 18,300 crore, followed by Coal India (2010) at nearly 15,500 crore and Reliance Power (2008) at 11,700 crore.

The Centre, however, did not disclose in the DRHP the discount that will be given to policyholders or LIC employees in the public offering. 

As per norms, up to 5 per cent of issue size can be reserved for employees and up to 10 per cent for policyholders.

During the current fiscal till now, 12,423.67 crore has been obtained through OFS, employee OFS, strategic disinvestment and buyback.

With agency inputs

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