LIC IPO: Issue Size May Be Cut To Rs 21,000 Crore, Launch Date Revision On The Cards

Update on LIC IPO: Listing may happen with a greenshoe option of Rs 9,000 crore, hence, taking the total IPO size to Rs 30,000 crore

The government has decided to dilute 5 per cent stake or or 31.6 crore shares in the LIC. Image: Getty

New Delhi: The mega initial public offering (IPO) of the state-run insurer Life Insurance Corporation of India (LIC) may undergo several changes before its launch.

To gain investors’ confidence, the central government is likely to cut the size of the much-awaited LIC IPO to Rs 21,000 crore from Rs 55,000 crore, according to a report by Business Standard on Friday (April 22).

It also mentioned that the IPO may come with a greenshoe option of Rs 9,000 crore, hence, taking the total IPO size to Rs 30,000 crore.

The government has decided to dilute 5 per cent stake or or 31.6 crore shares in the insurance behemoth.

The latest changes have reduced valuation of LIC from Rs 10 lakh crore to Rs 6 lakh crore, which is 1.1 times the embedded value of Rs 5.4 lakh crore.

The common valuation measure in the life insurance industry used to estimate the consolidated value of shareholders’ interests is called embedded value.

The government is likely to take a call on the timing of the IPO within this week.

However, CNBC TV-18 in a report mentioned that the listing is expected as early as next week, though the government has time until May 12 to launch the LIC IPO without filing fresh papers to the Sebi.

If the government postponed the IPO launch after May 12, then it have wait till September since fresh papers with updated quarterly results and valuations would have to be filed again with the Sebi.

While, if the government decides to go ahead with the IPO by May 12 then the insurer will have to file the red herring prospectus with the Sebi by next week.

The mega IPO was delayed by a few months because of volatile market conditions and geopolitical tension arising out of the Ukraine-Russia war. Thus the government postponed the listing.

According to news report, the public issue will reserve 35 per cent of its offer for retail investors, 10 per cent for policyholders, while 5 per cent for the employees of the LIC.

The listing is a key part of plans by the Centre, which wants to divest state assets to fund a yawning Budget deficit.

The disinvestment receipts pegged by the government is at Rs 65,000 crore for 2022-23, which is up from Rs 13,531 crore last fiscal year.