As the Life Insurance Corporation of India gears up to go public over the next month, a host of developments in the process begin to emerge, amid a grim global market outlook and inflation projections. The government is weighing all points to woo investors and promise value. Here’s what is new:
Cut in valuation
Sources told Mint that the government plans to cut the Life Insurance Corporation (LIC) public offer valuation by 30 percent to make the issue more attractive, despite concerns about soaring inflation, imminent interest rate hikes, and uncertainty surrounding the Russian invasion of Ukraine that has rattled markets across the world.
The government is now looking at a valuation of around Rs 11 lakh crore from the IPO, slashed from Rs 16 lakh crore planned earlier, sources said.
The government is looking to maintain a balance for investors once the shares start trading and ensure that the first-time investors—many of whom are LIC policyholders and have opened demat accounts to buy into the IPO—are not disappointed, the report added.
Reactions from officials from the Department of Investment and Public Asset Management (DIPAM), the Ministry of Finance, and LIC are awaited.
Another official said that the size of the LIC IPO, expected at the end of April or early May, will now be Rs 37,500 crore.
Revised IPO papers in the works
The LIC board will meet this weekend to "finalise its FY22 results and subsequently file a revised public offer document by the middle of next week," sources told The Economic Times. A government source also said the listing "would be completed by May 12".
The company will file the revised documents with the Insurance Regulatory and Development Authority of India (IRDAI) after its results are approved by the board. There are also whiffs of an April-end opening for the issue after roadshows are completed.
What we know.
The government may also file an updated draft red herring prospectus (UDRHP) for the IPO with the market regulator, the Securities and Exchange Board of India (Sebi), sources told CNBC-TV18.
As per the current DRHP, the government will dilute a 5 percent stake in the insurance behemoth through 31.6 crore shares to garner Rs 63,000 crore. It would help meet the Centre's curtailed disinvestment target of Rs 78,000 crore for the current fiscal.
A portion of the IPO would be reserved for anchor investors. Also, up to 10 percent of the issue size would be reserved for policyholders.
The LIC public issue would be the biggest IPO in the history of the Indian stock market. Once listed, LIC's market valuation would be comparable to top companies like Reliance Industries Limited and Tata Consultancy Services.
Sebi Guidelines for Listing
The government has time till May 12 to launch the LIC IPO without filing fresh papers with the market regulator, and if it misses the window, then LIC would have to file fresh papers, giving the results of the December quarter and also updating the embedded value.
LIC's embedded value, which is a measure of the consolidated shareholders' value in an insurance company, was pegged at about Rs 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 three times the embedded value