The government has time till May 12 to launch the initial public offering (IPO) of LIC without filing fresh papers with market regulator SEBI, an official said.
The government's sale of about 31.6 crore shares or 5 per cent stake in Life Insurance Corporation (LIC), which was estimated to fetch around ₹60,000 crore to the exchequer, was originally planned to be launched in March, but the Russia-Ukraine crisis has derailed the plans as stock markets are highly volatile.
On February 13, the government filed the draft red herring prospectus (DRHP) for the IPO with Sebi, which granted its approval for the same last week.
"We have a window till May 12 to launch the IPO based on the papers filed with SEBI. We are watching the volatility and will file the RHP giving the price band soon," an official said.
The DRHP filed with SEBI had details of the financial results of LIC and also the embedded value till September 2021.
If the government misses the May 12 window available with it, LIC would have to file fresh papers with SEBI giving the results of December quarter and also update the embedded value.
LIC’s embedded value, which is a measure of the consolidated shareholders’ value in an insurance company, was pegged at about ₹5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors. Although the DRHP does not disclose the market valuation of LIC, as per industry standards, it would be about three times the embedded value.
The official further said that although the market volatility has reduced in the last fortnight , it would wait for the market to stabilise further so that retail investors get confidence to invest in the stock. LIC has reserved up to 35 per cent of its total IPO size for retail investors.
"The portion reserved for retail investors require about ₹20,000 crore to come in from retail buyers. Based on our market assessment, currently the retail demand is not as much to bid for the entire quota of shares," the official said.
Valuation
The government was expecting to garner over ₹60,000 crore by selling about 31.6 crore or 5 per cent stake in the life insurance firm to meet the curtailed disinvestment target of ₹78,000 crore in the current fiscal year. In case the share sale does not happen by March, the government will miss the revised disinvestment target by a wide margin.
At 5 per cent stake dilution, the LIC IPO would be the biggest ever in the history of the Indian stock market. Once listed, LIC's market valuation would be comparable to top companies like RIL and TCS.
So far, the amount mobilised from the IPO of Paytm in 2021 was the largest ever at ₹18,300 crore, followed by Coal India (2010) at nearly ₹15,500 crore and Reliance Power (2008) at ₹11,700 crore.
The government, however, did not disclose in the DRHP the discount which will be given to policyholders or LIC employees in the public offering.
As per norms, up to 5 per cent of issue size can be reserved for employees and up to 10 per cent for policyholders. During the current financial year, so far ₹12,423.67 crore has been obtained through OFS, employee OFS, strategic disinvestment and buyback.