LIC IPO: DRHP expected today, regulator clears papers

Life Insurance Corporation of India is expected to file the draft red herring prospectus (DRHP) for its IPO today. According to market reports, LIC’s board will meet today to finalise the details of the IPO and submit papers to market regulator SEBI. The board will decide on a likely discount and the portion to be reserved for policyholders.

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The Insurance Regulatory and Development Authority (IRDAI) had cleared the LIC IPO proposal in a board meeting on February 9, as reported by CNBC-TV18.

LIC’s IPO size is expected to be in the range of Rs 70,000 crore to Rs 1 lakh crore, according to brokerage firm Angel One. The IPO will completely be an offer for sale (OFS) by the government of India and will consist of a fresh issue of equity shares. The government is looking to dilute its stake in the company to raise funds.

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The central government is looking to offload 5% of the shares it owns in the life insurance giant. The government holds 6.32 billion shares in LIC and it might sell around 316 million shares. LIC has an embedded value (EV) of Rs 5 lakh crore and the valuation of the IPO is likely to be 3-5 times the embedded value.

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LIC can offer a discount of as much as 5%, and 10% of the total issue can be reserved for policyholders, reported CNBC-TV18.

The quantum of disinvestment and EV numbers will be mentioned in the DRHP.

Last week, the embedded value of LIC was finalised at over Rs 5 lakh crore. The IPO may help the government to achieve its revised disinvestment target of Rs 78,000 crore, brought down from the initial target of Rs 1.75 lakh crore.

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LIC’s IPO is expected to hit the market before the end of the current financial year.

LIC, a household name in India, has more than 2,000 branches all over the country and more than 100,000 employees. It has sold over 286 million policies.

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LIC reported a net profit of Rs 2,688 crore in the financial year ending March 2019 and Rs 2,712 crore in 2019-20. In FY21, the insurance giant reported a net profit of Rs 2,900 crore.