LIC BOARD OKAYS CUT IN IPO ISSUE SIZE TO 3.5%
NEW DELHI: The board of Life Insurance Corporation of India on Saturday trimmed the size of the state-owned insurer’s initial public offering (IPO) to 3.5% from 5% earlier at an estimated valuation of ₹6 lakh crore, two people aware of the development said. The share sale will be launched in the first week of May, they said.
The issue size of the IPO has been revised to a minimum of 3.5% from the earlier 5% based on current market situation and feedback from experts, the people said, asking not to be named. The minimum value of the issue size would be around ₹21,000 crore.
“The company will seek fresh regulatory approval because of the change in the offer size and announce details of the IPO such as the issue price, dates, reservations, and discounts by Wednesday,” one of the people said.
Email queries sent to LIC and the finance ministry elicited no response.
The government, which fully owns the country’s largest insurer, is taking a cautious approach in the light of the ongoing war in Ukraine, which has adversely impacted market sentiment. The draft red herring prospectus (DRHP) filed on March 13 had envisaged an IPO of 5% of the shares.
The launch of LIC’s IPO at this juncture would add to the confidence of investors as India is the world’s fastest growing economy, the second person said.
“The government may further dilute its equity stake in the company through follow-on public offerings, or other routes, depending on the market situation, as there is no desperation for raising money immediately,” he said.
NEW DELHI: The board of Life Insurance Corporation of India on Saturday trimmed the size of the state-owned insurer’s initial public offering (IPO) to 3.5% from 5% earlier at an estimated valuation of ₹6 lakh crore, two people aware of the development said. The share sale will be launched in the first week of May, they said.
The issue size of the IPO has been revised to a minimum of 3.5% from the earlier 5% based on current market situation and feedback from experts, the people said, asking not to be named. The minimum value of the issue size would be around ₹21,000 crore.
“The company will seek fresh regulatory approval because of the change in the offer size and announce details of the IPO such as the issue price, dates, reservations, and discounts by Wednesday,” one of the people said.
Email queries sent to LIC and the finance ministry elicited no response.
The government, which fully owns the country’s largest insurer, is taking a cautious approach in the light of the ongoing war in Ukraine, which has adversely impacted market sentiment. The draft red herring prospectus (DRHP) filed on March 13 had envisaged an IPO of 5% of the shares.
The launch of LIC’s IPO at this juncture would add to the confidence of investors as India is the world’s fastest growing economy, the second person said. “The government may further dilute its equity stake in the company through follow-on public offerings, or other routes, depending on the market situation, as there is no desperation for raising money immediately,” he said.
The government wanted to launch the IPO in 2021-22 financial year that ended in March to meet its ambitious disinvestment target. The launch was postponed because market conditions at that time were are not conducive for a mega IPO.
“There was absolutely no desperation then, and there is none now, as both direct and indirect tax collections are robust,” the second person said.
The government, which trimmed its asset sale target by over 55% to ₹78,000 crore in 2021-22, ultimately was able to garner only ₹13,530.67 crore.
Its biggest divestment in the financial year was the sale of loss-making Air India to the Tata group.
The LIC IPO was also made available to non-residents, including foreign portfolio investors and eligible non-resident Indians, alternate investment funds, and other eligible foreign investors, the government had said in its earlier DRHP.
The war in eastern Europe has triggered sanctions by the US and other European countries against Russia, which has disrupted global supply chains and aggravated inflation. This prompted the government to rethink on the timing and size of the IPO, as the sentiment of foreign investors was important, the second person said.
The Union Cabinet chaired by Prime Minister Narendra Modi on February 26 allowed up to 20% foreign direct investment in LIC under the automatic route, paving the way for participation of overseas funds in the country’s biggest IPO.
The government on February 13 filed the DRHP to sell 5% of its equity stake in LIC, which involved over 316 million shares.
LIC is India’s leading insurance company with more than ₹30 trillion in assets under management. The number of individuals paying premium for its life policies was more than 210 million, as on February 28, 2021, official data show. LIC’s market share in terms of the number of policies issued was 74.58%, and 66.18% in terms of first-year premium income in 2020-21.