Centre files draft papers with market regulator SEBI for LIC IPO

New Delhi: The government on Sunday filed draft papers with capital market regulator SEBI for selling 5 per cent stake in insurance behemoth LIC through an initial public offering which is likely to hit D-street in March. “The DRHP of LIC IPO has been filed today with the SEBI. For filing valuation about 31.6 crore shares are on offer representing 5 per cent equity,” Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey tweeted. As per the draft red herring prospectus, LIC’s embedded value has been pegged at about Rs 5.4 lakh crore as of 30 September, 2021, by international actuarial firm Milliman Advisors. Under the embedded value method, insurance companies’ present value of future profit is also included in its present net asset value (NAV). The IPO is 100 per cent offer for sale (OFS) by the Government of India and no fresh issue of shares by Life Insurance Corporation (LIC). “LIC has 66 per cent market share in new business premiums with 283 million policies and 1.35 million agents as of 31 March, 2021,” Pandey added. The government, however, did not disclose in the DRHP the market valuation of LIC or the discount which will be given to policyholders or LIC employees in the public offering. The IPO of LIC is expected by March and the proceeds would be crucial to meet the revised disinvestment target of Rs 78,000 crore for the current fiscal. So far, the government has raised Rs 12,030 crore through CPSE disinvestment and Air India strategic sale this fiscal. The government has appointed 10 merchant bankers, including Kotak Mahindra Capital, Goldman Sachs (India) Securities Pvt Ltd, Citigroup Global Markets India Pvt Ltd and Nomura Financial Advisory and Securities (India) Pvt Ltd, to manage the mega IPO of the country’s largest insurer. The government is also mulling allowing foreign investors to pick up stake in LIC. As per Sebi rules, foreign portfolio investors (FPI) are permitted to buy shares in a public offer. FDI policy would have to be tweaked for FII/FPI investment in this IPO, as LIC is a corporation and not an insurance company. The Cabinet Committee on Economic Affairs had in July last year cleared the proposal for LIC’s IPO.