Government to sell 5% of LIC in mother of all IPOs

NEW DELHI : The government aims to raise approximately 75,000 crore by selling a 5% stake in Life Insurance Corp. of India (LIC) through India’s largest-ever initial public offering in what is expected to test investors’ appetites in a volatile market.

According to draft IPO documents filed with the Securities and Exchange Board of India (Sebi), the government will sell 316.25 million shares through an offer of sale (OFS).

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Based on 5.39 trillion in intrinsic value established by the actuarial firm Milliman Advisors, the government is seeking a valuation of at least 15 trillion for LIC, said an investment banker, who is part of the union advising the government on the sale of shares. However, the money actually raised will depend on investor appetite.

“Private insurers are trading at 2.5 to 3.5 times their intrinsic value,” the investment banker said, seeking anonymity. “However, the government is looking for three to five times the intrinsic value of LIC,” the person added.

At three times intrinsic value, the size of the IPO offering should be approximately 75,000 crore. At this level, the listing is expected to break records for total funds raised by an Indian company by a wide margin. Proceeds from the sale will also help the government exceed the revised annual asset sale target of 78,000 crores for the year ending March 31.

LIC is also the largest fund manager in India as of September 30, with 39.56 trillion assets under management (AUM) on a stand-alone basis. This is more than 3.3 times the assets under management of all private life insurers in India and 1.1 times the entire Indian mutual fund industry. Its equity investments represented approximately 4% of NSE’s total market capitalization as of September 30.

LIC’s IPO documents also claimed that it ranked fifth in the world in terms of life insurance gross written premiums and 10th in the world in terms of total assets.

For fiscal years 19, 20, 21 and the six months ended September 30, LIC had a market share of 66.4%, 66.2%, 64.1% and 63.6%, respectively, in terms of premiums totals in the life insurance sector, indicating a slight decline over the years.

Mint announced last week that the government would sell at least 5% of the capital through the IPO, with some shares reserved for staff and policyholders.

“The IPO is 100% SFO by the government and no new issuance of shares by LIC,” Secretary of the Department of Investment and Public Asset Management Tuhin Kanta Pandey said in a post. Twitter Sunday night. largest IPO ever to hit the market this fiscal year.

The documents specify that the share reserved for staff may not exceed 5% of the post-offer share capital and may be offered at a discount. In addition, he said that the insured part would not exceed 10% of the size and could also be offered at a discount. Approximately 60% of the qualified institutional bidders share may be allocated to anchor investors on a discretionary basis. “Provided valid offers are received at or above the offer price, undersubscription, if any, in the non-institutional portion or the retail portion, would be permitted to meet fallout of any other category or combination of categories of bidders at the discretion of our company and the selling shareholder in consultation with the lead managers and the designated exchange,” the prospectus states.

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