The Life Insurance Corporation of India's (LIC) initial public offering (IPO) is set to open on May 4 in the Rs 902-949 per equity share price band. The issue will close on May 9. The government will disinvest a 3.5 per cent stake in LIC to garner Rs 21,000 crore for the exchequer. Retail investors will receive a Rs 45 per share discount on the cut-off price, whereas the policyholders will get then Rs 60 cheaper. Thus far, Paytm IPO (in 2021) was the largest ever IPO in the country at Rs 18,300 crore, followed by Coal India Ltd. (CIL) at around Rs 15,500 crore and Reliance Power in 2008 at Rs 11,700 crore.
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At the upper end of the IPO's price band, the offer will raise Rs 21,000 crore whereas at the bottom end it will fetch the government around Rs 20,000 crore, valuing the state-run insurer at approx. Rs 6 lakh crore. Founded on investor feedback, the market value of LIC has been pegged at 1.1 times its embedded value of Rs 6 lakh crore. The government has also filed papers with the Securities and Exchange Board of India (SEBI) seeking exemption from the Rs 5 per cent stake sale norm. As per the SEBI rules, companies with a valuation of more than Rs 1 lakh crore have to sell a 5 per cent stake in a public issue. LIC's embedded value was pegged at around Rs 5.4 lakh crore as of September 30, 2021, by the international actuarial firm Milliman Advisors. The IPO will entirely be an offer for sale (OFS) by the government and will not comprise any fresh issue of equity shares. The proceeds of the share sale will go to the government. LIC will not get any funds. The government presently owns a 100 per cent stake in the state-run insurer.
Also Read: Govt files updated DRHP for LIC IPO LIC IPO: Share allotment for investors, policyholders, and employees
The IPO has a reservation of 15,81,249 equity shares or 0.025% of the post-offer paid-up equity share capital for eligible employees, 2,21,37,492 equity shares (up to 0.35% of the post-offer paid-up equity share capital) have been reserved for subscription by eligible policyholders
The overall issue size of 221.3 million shares, out of which 10 per cent will be earmarked for LIC policyholders, while, around 1.5 million shares will be reserved for employees.
The discount on the cut-off price for retail and eligible employees is Rs 45, while it is Rs 60 for the policyholders.
The retail portion of the IPO is 35 per cent with 15 per cent earmarked for non-institutional investors and 50 per cent for qualified institutional buyers (QIBs).
Investors can apply in the QIB segment and retail portion, while the LIC policyholders who have one or more policies of the state-run insurer would be eligible to apply in the IPO under the Policyholder Reservation Portion.
The maximum bid amount under the policyholder reservation portion by an eligible policyholder must not exceed Rs 2,00,000. The aggregate of reservations for eligible policyholders must not exceed 10 per cent of the IPO offer size. Eligible LIC employees can apply for the "Employee Reservation Portion" at a discounted price.
The maximum bidding amount under the employee reservation portion for an eligible employee must not exceed Rs 2,00,000. The reservation for eligible employees can't exceed five per cent of the total offer.
The government had in February this year planned to offload a five per cent stake in the insurance behemoth and had filed draft papers with SEBI. However, last week, LIC's board approved a 3.5 per cent equity offer, lower than the five per cent proposed in its DRHP. LIC IPO: How to apply online
LIC IPO: How to check share allotment
(Updated the story with graph.)