LIC IPO: Insurance regulator (IRDAI) has cleared LIC’s IPO proposal. The quantum of divestment and embedded value numbers to be mentioned in DRHP.
LIC IPO: The central government is all set to file the draft papers of initial public offering (IPO) of Life Insurance Corporation of India (LIC) with market regulator likely tomorrow. Insurance regulator (IRDAI) has cleared the LIC IPO proposal, sources told CNBC-TV18. The LIC DRHP filing with SEBI is now likely to happen on February 11, 2022. The quantum of divestment and embedded value numbers to be mentioned in DRHP.
LIC IPO: Reserved Portions
The government plans to keep a portion of IPO for LIC policyholders, who could also get discounts as the government wants to rope in a larger section of retail investors. Similarly, the government is in the process of approving a 20 per cent foreign investment limit in LIC to rope in foreign investors to make the IPO a huge success. The IPO is expected to hit markets by mid-March. Further, LIC has approached anchor investors to raise about Rs 25,000 crore before the IPO, according to ET Now. For policyholders, the government would reserve 5-10 per cent at a discounted rate, the sources mentioned.
LIC IPO: How Policyholders Can Apply
In December last year, the insurance giant had urged policyholders to link their PAN with LIC to participate in the LIC and also open demat accounts. “In order to participate in any such public offering, policyholders will need to ensure that their PAN details are updated in the corporation’s records,” it said in an advertisement following the announcement of LIC IPO.
The LIC IPO participants will also need to ensure that they have a valid demat account. “You would incur costs towards opening of a demat account and or PAN issuance and maintaining the demat account or other ancillary costs,” the insurer added in the advertisement.
LIC IPO: Market Share
LIC has a majority share of the life insurance market in India. The government, which hopes to raise as much as $12 billion from selling a stake in the IPO, expects the proceeds will help it bridge a deficit gap this fiscal year.
LIC is not only the world’s largest when it comes to home-market share with over 64.1 per cent of the total gross written premium as of 2020 but also the one that offers the highest return on equity at 82 per cent, apart from being the third largest in terms of life insurance premium, says a Crisil report.
LIC IPO: Why is it Crucial for the Government?
The much-awaited LIC IPO is expected to be the biggest ever witnessed by the country. LIC’s IPO may help the government reach its revised divestment target of Rs 78,000 crore, down from the initial target of Rs 1.75 lakh crore. So far this financial year the government has managed to raise Rs 12,000 crore from divestment receipts.
At over Rs 15 lakh crore valuation, a 5-10 per cent stake sale could fetch up to Rs 1.5 lakh crore. The government may sell up to 10 per cent share of LIC IPO, according to sources.
LIC IPO: Merchant Banks Involved
Actuarial firm Milliman Advisors LLP India has worked out the embedded value of LIC, while Deloitte and SBI Caps have been appointed as pre-IPO transaction advisors. Under the embedded value method, insurance companies’ present value of future profit is also included in their present net asset value (NAV).
The government has appointed 10 merchant bankers, including Goldman Sachs (India) Securities Pvt Ltd, Citigroup Global Markets India Pvt Ltd and Nomura Financial Advisory and Securities (India) Pvt Ltd, to manage the mega IPO of the country’s largest insurer.
