LIC IPO: Centre files draft papers with SEBI; 10% of IPO reserved for policyholders

The Central government on Sunday filed the draft red herring prospectus (DRHP) with market regulator SEBI for mega LIC IPO, which is expected to make its debut in the capital market in March. According to the draft papers filed with the Securities and Exchange Board of India, the Centre will sell more than 31 crore equity shares in the Life Insurance Corporation of India/

"The DRHP of LIC IPO has been filed today with the SEBI," Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey tweeted, adding that the IPO is entirely an Offer for Sale (OFS). About 31.6 crore shares are on offer representing 5% equity.

As of March 31, 2021, the LIC has a 66% market share in the New Business Premiums with 283 mn policies and 1.35 mn agents, Pandey informed. The government aims to come out with the LIC IPO and subsequent listing of the government-owned insurer on bourses by March.

LIC IPO: 10% of the offering would be reserved for policyholders

A portion of the offering will be reserved for anchor investors. Additionally, 10% of the IPO would be reserved for policyholders. Actuarial company Milliman Advisors LLP India had worked out the embedded value of LIC, while Deloitte and State Bank of India (SBI) Caps have been appointed as pre-IPO transaction advisors. 

The listing of LIC is crucial for the centre to meet the lowered revenue estimates of Rs 78,000 for the current fiscal. So far, the government has raised about Rs 12,000 crore from the privatisation of Air India and stake sake in other PSUs.

The government has appointed 10 merchant bankers,  including Citigroup Global Markets India Pvt Ltd, Nomura Financial Advisory and Securities (India) Pvt Ltd and Goldman Sachs (India) Securities Pvt Ltd, to manage the massive IPO of the country's largest insurer.

The government is mulling allowing foreign investors to pick a stake in LIC. According to SEBI rules, foreign portfolio investors (FPIs) are allowed to buy shares in listed companies. FDI policy would have to be tweaked for FII/FPI investment in this IPO, as LIC is a corporation and not an insurance company.