LIC IPO DRHP filed; all OFS, no fresh issue, govt to offload 5%

Life Insurance Corporation of India (LIC) is looking to sell the government’s 316 million equity shares in the company in the upcoming IPO, the Draft Red Herring Prospectus (DRHP) filed with capital markets regulator SEBI showed today. LIC’s DRHP has set the wheels in motion for the country’s largest public issue. LIC IPO will be entirely an offer for sale (OFS) by the promoter — Government of India. The DRHP mentions the embedded value of LIC to have been calculated at Rs 5.39 lakh crore as of September 31, 2022. 

The government is looking to sell 316,249,885 equity shares of face value Rs 10 each through the public issue, which is expected to hit the street before the end of the current financial year in March. The embedded value of LIC was finalised at more than Rs 5 lakh crore, a week ago. The proceeds of LIC share sale will go to the Government of India, and the insurance company will not receive any funds from the all-OFS IPO, as there will be no fresh issue of equity shares.

The public issue may help the government reach its revised divestment target of Rs 78,000 crore, cut down from the initial target of Rs 1.75 lakh crore. So far this financial year the government has managed to raise Rs 12,000 crore from divestment receipts. The Government of India currently owns 100% stake in LIC. LIC is a state-owned insurance behemoth, controlling a large portion of the market share.

LIC’s IPO will have a 50% reservation for Qualified Institutional Buyers (QIB), not less than 15% portion of the IPO will be reserved for Non-Institutional Investors (NII). This will leave 35% of the public issue reserved for retail investors. Policyholders of the state-run insurance company will also have a quota reserved in the LIC IPO along with employees of LIC. Both the policyholders and the eligible employees could get a discount in the IPO. The public issue has been in the works for years now.

LIC’s IPO could become the largest ever seen by the domestic markets. Earlier last year, Paytm’s Rs 18,300 crore public issue had become the largest issue seen by D-Street. The record was earlier held by Coal India, which raised money from the primary market in 2010.

The DRHP does not give out details on when the LIC IPO will reach Dalal Street, the pricing of the issue, the discount policyholders and employees will get, valuation, and the total issue size. Kotak Mahindra Capital, Goldman Sachs (India), Axis Capital, ICICI Securities, BofA Securities, JM Financial, Citigroup, JP Morgan India, and Nomura are the book running lead managers of the issue. Shares of LIC will list on the BSE and NSE upon successful completion of the IPO.