Centre to stick to selling 5% stake in LIC public offering
The size of LIC’s initial public offering is likely to be around ₹37,000 crore
NEW DELHI: The government will launch the initial public offering of state-run Life Insurance Corp. of India (LIC) in the first week of May, just days ahead of a deadline that would require the Centre to update the share sale documents with the company’s March quarter earnings, two people aware of the development said.
A top official, one of the two cited above, said that the government would stick to its initial plan of selling just 5% of the insurance giant, given the volatility in the market, and retain the option of selling an additional stake within the current fiscal to boost asset sales proceeds.
“It will be done in early May. The size will not be beyond 5% in the first go,” the official said, asking not to be named.
A second official, also seeking anonymity, said that the decision to keep the share sale size at 5% had been taken after with investors, including sovereign and pension funds that have evinced serious interest in the IPO.
“The pricing is yet to be decided, but it will take into account the realities of the markets,” the official added. A Bloomberg report on Friday said the government had cut the IPO size to ₹30,000 crore.
Mint reported on April 13 that the government has decided to slash the valuation it is seeking for LIC by about 30% to make the initial share sale attractive as the war in Ukraine, surging inflation and looming interest hikes make investors jittery. The report said that the size of the LIC IPO is likely to be around ₹37,000 crore.
Queries sent to the finance ministry and the department of investment and public asset management (Dipam) remained unanswered.
The success of LIC’s IPO is crucial for the government to meet its asset sales goal, which has been cut to a modest ₹65,000 crore target for the current fiscal, lower than the revised ₹78,000 crore for the previous fiscal.
Delaying the IPO beyond May 12 will mean that the government will have to refile LIC’s share sale documents with March quarter financials, which will delay the IPO by two to three months.
Mint reported earlier this week that the country’s largest insurer put up a robust performance with the first-year premium collection, a key metric, rising 7.9% to ₹1.98 lakh crore for the year ended March 31. In March, the company’s premium collections grew 51% to ₹42,319.22 crore from a year earlier, garnering a market share of 71%. LIC sold 21.7 million insurance policies in the year ended March 31, 3.54% more than the previous fiscal, boosting its market share to 74.6% in terms of policies sold.
Tuhin Kanta Pandey, secretary of Dipam, said last month that the Centre would proceed with the IPO only when it is confident of successfully listing the insurer.
The mega IPO has drawn significant interest from at least 12 large foreign and domestic fund management firms, Mint reported last week. At least five of India’s top asset management companies, three large foreign sovereign funds, two global pension fund management companies and two global hedge funds have committed to invest ₹18,000 crore to bankers managing the LIC IPO, the report said. Mint had also reported that domestic mutual funds are likely to invest ₹7,000-8,000 crore as anchor investors.