The Life Insurance Corporation’s (LIC) public issue offer is finally here, with the long-awaited initial public offering (IPO) to open on May 2 for anchor investors and from May 4 to May 9 for the general public, the insurance behemoth confirmed on Wednesday at its press conference.
Beginning of “LIC 3.0”, says LIC Chairman M R Kumar, referring to India’s biggest public issue, which will be in the price band of ₹ 902-949, with a Rs 60 discount to policyholders and a Rs 45 discount for retail investors and employees.
India’s largest insurer LIC is likely to list on the stock exchanges on May 17, a week after its mega IPO closes.
“LIC to be the biggest public offering ever. The public will evaluate it effectively. it is a great opportunity and something which was considered unthinkable and is now coming to investors to invest in,” said DIPAM secretary Tuhin Kanta Pandey.
“The government had strong commitment to list LIC. LIC is a strong corporation of India’s people and its listing is part of a long term strategic vision of the government and is meant for long-term value creation for shareholders,” he added.
The employee reservation portion will be 5 per cent of the post-offer equity share capital, and the policyholder reservation portion will be 10 per cent of the offer size.
The LIC board approved a cut in its IPO issue size to 3.5 per cent from 5 per cent, the company said.
The government will now sell 20,557 crores amounting to a 3.5 percent dilution of its stake in LIC for Rs 21,000 crore, valuing the insurance behemoth at 6 lakh crore.
DIPAM secretary Tuhin Kanta Pandey said, the size for the LIC IPO is right, given the market constraints. We want to champion LIC as a long term value creator in the equity market.
The decision to list took into account market demand, stabilising market conditions. Indian markets have recovered from initial shocks, while global sentiments are weak, Indian markets are strong due to domestic flows and is the only market in the world to fuel such a large public offer, he added.
Government sources had said on Tuesday that depending on the demand and subscription at the IPO, there is an option for the government to increase the stake offer to 5 per cent, in which case the state’s coffer will garner ₹ 30,000 crore from the sale of its equity.
But the drastic lowering of ambitions for the IPO would be a setback for the government and challenge its fiscal balances as the disinvestment was positioned and aimed at replenishing the state’s coffers.
Whether the final offer is a stake sale of 3.5 per cent for ₹ 21,000 crore or 5 per cent for ₹ 30,000 crore, LIC’s IPO will be India’s largest ever.
Indeed, the public issue size at the lowered Rs 21,000 crore will be larger than the amount mobilised from the IPO of Paytm in 2021 – which is the largest ever currently at Rs 18,300 crore, followed by Coal India (2010) at nearly Rs 15,500 crore and Reliance Power (2008) at Rs 11,700 crore.
Previously, the government was expecting to garner over Rs 60,000 crore by selling about 31.6 crore or 5 per cent stake in the life insurance firm to meet the curtailed disinvestment target of Rs 78,000 crore in 2021-22.
The stake sale was initially planned to be launched in March 2022, but the Russia-Ukraine crisis derailed those plans as stock markets were highly volatile.