LIC IPO Update: According to the latest development on the LIC IPO, CNBC TV18 has learned from its sources that it will not approach the market for a year for LIC FPO. According to Sebi rules, companies can’t carry out a follow-on public offer (FPO) for six months after the IPO. Further, sources with the knowledge of the matter have also said that, the market regulator, SEBI is considering the exemption sought by LIC on a mandatory 5 per cent listing.
Under the current rules, if the post-issue capital of a company calculated at the offer price is above Rs 1 lakh crore, it’s required to issue shares worth Rs 5,000 crore and five percent of equity. The five per cent IPO rules would mean a Rs 35,000 crore LIC issue which is unlikely to excite markets amid high volatility.
India’s Fiscal Deficit Target at Risk
Life Insurance Corporation of India’s board on Saturday approved selling a 3.5 per cent stake for Rs 21,000 crore, compared with the 5 per cent proposed in the draft papers estimated before Russia invaded Ukraine. Anchor investors had been reluctant to commit as the war eroded demand for equities, according to people with knowledge of the matter, with foreign funds withdrawing more than $16 billion from Indian stocks this year.
The initial public offering is likely to hit the market in the first week of May, government sources have told CNBC-TV18. Last month, the government filed fresh draft papers for the IPO. The Centre now has time till May 12 to launch the offer, after which the Centre will need to file fresh papers with markets regulator Sebi. It will also need to declare the results of the December quarter and also update the embedded value. The embedded value of LIC was Rs 5.39 lakh crore as of September 31, 2021, according to draft papers filed with Sebi.
LIC IPO Reserved Portions
Around half of the IPO issue has been fixed for qualified institutional buyers (QIBs). Out of the QIB’s portion, 60 per cent has been earmarked for anchor investors on a discretionary basis. One-third of the anchor investor portion will be reserved for domestic mutual funds. About 15 per cent will be reserved for non-institutional investors (NII). Around 35 per cent will be available for retail investors to participate. A significant portion, not exceeding 10 per cent of the public issue, will also be reserved for the policyholders. For employees also, 5 per cent of LIC IPO will be reserved. Both the employees and policyholders will get a chance to book LIC IPO at a discounted rate.
LIC IPO: Why a Bumper Listing is Likely?
The state-run insurance company, set to open for the public anytime now amid volatile markets, has seen a jump in its first-year premium collection for the year ended March 31, 2022. The key metric soared 7.9 per cent to Rs 1.98 trillion for the time period, data reviewed by Mint showed.
According to the data, LIC ended its previous fiscal at 63.25 per cent market share. This was a lower number in a year-on-year basis. In March, however, the country’s largest insurer’s premium collections jumped to Rs 42,319.22 crore, a 51 per cent increase than the previous year, as per the data.
Meanwhile, even after the reduced size of Rs 21,000 crore, the LIC IPO is going to be the biggest initial public offering ever in the country. As of now, Paytm IPO is the biggest one at Rs 18,300 crore in 2021, followed by Coal India Ltd at Rs 15,500 crore in 2010 and Reliance Power at Rs 11,700 crore in 2008.
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