LIC IPO to open on May 4, price range set at Rs 902-949 per share

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New Delhi: The Life Insurance Corporation of India (LIC) has set the price range at Rs 902-949 per share for the initial public offering (IPO) which is expected to open on May 4.

The government aims to raise around Rs 21,000 crore from the public issuance by selling a 3.5% stake in the insurance giant.

The insurance giant is reportedly offering a rebate of Rs 60 to policyholders and Rs 40 to retail investors and employees.

However, only LIC policyholders will be eligible for this discount who purchased their policy on or before April 13, 2022, the day LIC filed its draft red herring flyer at the Securities and Exchange Board of India (SEBI), Living mint reported.

The issue is expected to open for subscription on May 4 and is expected to close on May 9.

The offering lot would be 15, which means that a candidate will be able to apply for the IPO in lots and one lot of the public offering consists of 15 LIC shares.

Anchor investors can subscribe to shares of the insurance company on May 2.

With this IPO, the government would offload a 3.5% stake in the insurance giant by selling 221.3 million shares.

According to SEBI standards, companies with a valuation above Rs 1 lakh crore must sell a minimum stake of 5% in the IPO.

The intrinsic value of LIC, which is a measure of the consolidated shareholder value of an insurance company, was pegged at around Rs 5.4 lakh crore as of September 30, 2021 by international actuarial firm Milliman Advisors.

Based on investor feedback, the market value of the government-owned LIC has been set at 1.1 times its intrinsic value or Rs 6 lakh crore.

However, the government has filed documents with SEBI requesting an exemption from the 5% stake sale standard, sources told PTI.

LIC has reserved 22.1 million shares or 10% of the issue size for its policyholders while 1.5 million shares for employees, sources said.

After the policyholders’ and shareholders’ reservations, the remaining shares will be allocated in the proportion of 50% for qualified institutional buyers (QIB), 35% for retail investors and 15% for non-institutional investors.

Sources said that 60% of the QIB portion has been reserved for anchor investors.

The IPO of LIC is an Indian Government Offer for Sale (OFS) and there will be no new issuance of shares by the insurance giant.

In an OFS lane, promoters of public companies can sell their shares and reduce their stakes transparently through the Stock Exchange’s auction platform.

Thread reported in January that a citizens’ platform called the People’s Commission on the Public Sector and Public Services had raised a number of “red flags” urging the government to “pause and think” about concerns raised by them about the IPO of the LIC.

“95% of LIC’s profits go to policyholders. They are the ones who have funded the phenomenal growth of LIC over the decades. LIC and its policyholders have a symbiotic relationship, with each having a huge interest in the other. In the normal course, therefore, they are the ones who should play the central role in determining LIC’s future growth trajectory,” the commission said.

However, according to an explainer of the Indian Express, LIC will not receive any proceeds from the offer.

The IPO of LIC would contribute a significant portion of the proceeds of the budgeted divestment in the current fiscal year, according to the PTI report. The government has pegged divestment revenue at Rs 65,000 crore for the current financial year compared to Rs 13,531 crore in the last financial year.

(With PTI entries)

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