LIC public issue expected to open in early May

The much-awaited initial public offering of the Life Insurance Corporation of India is likely to open in the first week of May and is expected to close after 4th or 5th day of its opening. It is also reported that there will be no greenshoe option in the IPO.

The Securities and Exchange Board of India (SEBI) has given its nod to the updated draft red herring prospectus, which lists a 3.5 percent stake sale instead of 5 percent as mentioned in the previous draft papers. The government is planning to raise an amount of Rs 21,000 crore by selling around 22 crore shares which is equivalent to a 3.5 percent stake.

By seeking Rs 21,000 crore for the revised holding on the block, the government is targeting a valuation of Rs 6 trillion for the insurer. Earlier, the DRHP had mentioned that around half of the IPO issue has been fixed for qualified institutional buyers (QIBs).

Out of the QIB’s portion, 60 percent has been earmarked for anchor investors on a discretionary basis. One-third of the anchor investor portion will be reserved for domestic mutual funds. The LIC IPO has received Rs 13,000 crore worth of investment commitments from anchor investors, more than twice the value of shares offered to such investors.

About 15 percent will be reserved for non-institutional investors (NII). 35 percent will be available for retail investors to participate. A significant portion, not exceeding 10 percent of the public issue, will also be reserved for the policyholders. For employees also, 5 percent of LIC IPO will be reserved. Both the employees and policyholders will get a chance to book LIC IPO at a discounted rate.

Previously, the government was expecting to reserve over Rs 60,000 crore by selling about 31.6 crore or 5 percent stake in the life insurance firm to meet the limited disinvestment target of Rs 78,000 crore in 2021-22.