Virendra Pandit
New Delhi: With the much-anticipated Initial Public Offering (IPO) of Life Insurance Corporation (LIC) opening on May 4, the government aims to raise Rs. 21,000 crore through this partial divestment by offloading 3.5 percent of its holding in the country’s largest life insurer, subject to regulatory approval.
On Wednesday, the Finance Ministry’s top official, Tuhin Kanta Pandey, Secretary, Department of Investment and Public Asset Management (DIPAM), said the company had set a price band between Rs.902 and Rs. 949 per equity share.
“This IPO will not crowd out capital and monetary supply in the market. It is right-sized, given the constraints in the market. The government has a long commitment to list LIC on the stock exchange as part of its strategic vision.
“Despite its reduced size, the LIC IPO is the biggest in India yet. It is likely to list on the stock exchanges on May 17, a week after its closure.”
According to the final papers filed with SEBI, the allotment of shares to the dematerialized (demat) accounts of bidders will be completed by May 16, after which LIC would begin trading equity shares in the stock exchanges and list “on or about May 17”.
The government is selling 22,13,74,920 shares in LIC, aiming to raise around Rs 21,000 crore. Up to 15,81,249 shares and 2,21,37,492 shares are reserved, respectively, at discounted prices for employees and policyholders. Over 98.8 million shares are reserved for Qualified Institutional Buyers (QIBs) and over 29.6 million shares for non-institutional buyers.
While anchor investors could apply until May 2, other investors could do so for a share in the pie until May 9. The government has already filed a revised Draft Red Herring Prospectus (DRHP) with the market regulator, the Securities and Exchange Board of India (SEBI), the media reported on Wednesday.
With LIC’s current market valuation at Rs. 6 lakh crore, the issue size is expected to collect Rs. 21,000 crore.
The DRHP had already mentioned that the employee reservation portion will not exceed 5 percent of post-offer equity share capital. Also, the policyholder reservation portion will not exceed 10 percent of the offer size.
Last week, the LIC Board approved the issue size at 3.5 percent of government holding, comprising nearly 22.14 crore shares. In the earlier DRHP filed on February 13, the government had proposed offering 5 percent of the total number of equity shares (i.e., 31.62 crore shares).
They brought this down to 3.5 percent of government holdings after the Russian invasion of Ukraine started on February 24, triggering market uncertainties. This and other reasons led to withdrawals by foreign portfolio investors (FPI) from the Indian market and higher inflation and the resultant increase in the interest rates globally.
Because of the Russian-Ukraine conflict, the government had to postpone the March-end deadline for bringing the issue. But it had time until May 12 to launch the IPO without filing fresh papers with markets regulator SEBI.
The LIC IPO is expected to contribute a major chunk to the budgeted disinvestment proceeds in the current fiscal year, 2022-23. The government has pegged disinvestment receipts at Rs. 65,000 crore for FY23, up from Rs. 13,531 crore last fiscal year.