The size of the Life Insurance Corporation‘s (LIC’s) initial public offering (IPO) may be slashed to Rs 21,000 crore, said people in the know. The LIC IPO, however, may come with a greenshoe option of Rs 9,000 crore. The total IPO size, after accounting for the greenshoe option, will work out to Rs 30,000 crore and will lead to a 5 per cent dilution of the government stake. A greenshoe option is an over-allotment option. The option gives the company a choice to retain excess subscription and helps it adjust the public issue as per demand and market conditions.
LIC IPO Size
The government filed LIC’s draft papers with the Securities and Exchange Board of India (Sebi) in February, and the aim was to raise around Rs 65,000 crore at a market valuation of Rs 12 lakh crore. Now, the IPO size is likely to be reduced to Rs 21,000 crore with a greenshoe option of Rs 9,000 crore.
LIC IPO Date
The LIC’s public offer is now expected to hit the market on May 2, according to the BS report quoting sources. The government last month filed fresh draft papers for the IPO. The government now has time till May 12 to launch the offer, after which the Centre will need to file fresh papers with the Securities and Exchange Board of India. It will also need to give the results of the December quarter and also update the embedded value. LIC’s embedded value stood at Rs 5.39 lakh crore as of September 31, 2021, according to draft papers.
Currently, the market conditions are volatile due to sustained selloffs by foreign portfolio investors amid the US Federal Reserve’s decision to aggressively tighten its monetary policy and increase interest rates.
LIC IPO Reserved Quota
Around half of the IPO issue has been fixed for qualified institutional buyers (QIBs). Out of the QIB’s portion, 60 per cent has been earmarked for anchor investors on a discretionary basis. One-third of the anchor investor portion will be reserved for domestic mutual funds.
About 15 per cent will be reserved for non-institutional investors (NII). Around 35 per cent will be available for retail investors to participate. A significant portion, not exceeding 10 per cent of the public issue, will also be reserved for the policyholders. For employees also, 5 per cent of LIC IPO will be reserved. Both the employees and policyholders will get a chance to book LIC IPO at a discounted rate.
Biggest IPO So Far
Even after the reduced size of Rs 21,000 crore, the LIC IPO is going to be the biggest initial public offering ever in the country. As of now, Paytm IPO is the biggest one at Rs 18,300 crore in 2021, followed by Coal India Ltd at Rs 15,500 crore in 2010 and Reliance Power at Rs 11,700 crore in 2008.
