The much-awaited Life Insurance Corporation of India (LIC) IPO (initial public offering) is set to open next week with the public sector behemoth filing its Red Herring Prospectus (RHP) with capital market regulator SEBI on Tuesday evening. However, much has changed since LIC filed its draft papers earlier in February. Now, the insurance giant is looking to sell 221 million equity shares, down from 316 million it had planned earlier. The issue size has been trimmed down to 3.5% of equity, from 5% planned earlier. But LIC’s public issue will still be the largest ever to hit Dalal Street. LIC IPO will open on May 4.
Price band and issue size
The government of India will sell shares of LIC at a fixed price band of Rs 902-949 per equity share of Rs 10 each face value. At the higher end of the price band, the LIC IPO will help the government raise just over Rs 21,000 crore. Earlier in February, the government had planned on raising around Rs 60,000 crore from the public issue, selling just over 5% stake. Now the size of the sale has been brought down to 3.5%.
Valuations have also come down for LIC. Now the company is valued at just over Rs 6 lakh crore. The RHP mentions the embedded value of LIC to have been calculated at Rs 5.39 lakh crore as of September 31, 2022.
Bid lot and reservations
LIC IPO will open for investors to bid on May 4 and close on May 9. Investors can bid for the issue in the price band of Rs 902-949 per share and in a bid lot of 15 equity shares and in multiples of 15 equity shares thereafter. At the higher end of the price band of, an investor will have to shell out Rs 14,235 for a lot of LIC shares.
LIC IPO has a reservation of 15,81,249 equity shares or 0.025% of the post-offer paid-up equity share capital for subscription by eligible employees of the company. Further, 2,21,37,492 equity shares have been reserved for subscription by eligible policyholders of LIC. This constitutes up to 0.35% of the post-offer paid-up equity share capital. LIC has also decided to give its employees a Rs 45 per share discount and Rs 60 per share discount to policyholders. Retail investors will also get a Rs 45 per share discount.
Of the total IPO, 50% has been reserved for qualified institutional buyers (QIBs), 35% has been set aside for retail investors, and 15% for non-institutional investors. As much as 60% of QIBs portion is reserved for anchor investors.
The issue will entirely be an offer for sale (OFS) by the government of India and will not include any fresh issue of equity shares. The proceeds of LIC share sale will go to the Government of India, and the insurance company will not receive any funds. The Government of India currently owns 100% stake in LIC. LIC is a state-owned insurance behemoth, controlling a large portion of the market share.
The public offering of LIC will help the government reach its divestment target for the current fiscal year which has been set at just Rs 65,000 crore. The target for the previous financial year, which the government failed to meet, was set at Rs 78,000 crore.