Govt to sell 5% stake in LIC; embedded value at Rs 5.4 L cr

Mumbai: The government on Sunday filed draft papers with the markets regulator for selling a 5 per cent stake in the Life Insurance Corporation of India (LIC) through a public issue that promises to be India's largest ever.

As per the 652-page draft red herring prospectus filed with the Securities and Exchange Board of India, the initial public offering will comprise over 31.625 crore equity shares of Rs 10 face value, constituting 5 per cent of the insurance behemoth's over 632.5 crore equity shares, which are 100 per cent owned by the Government of India.
The IPO will allot a minimum number of shares to all retail bidders.

As per the prospectus, LIC's embedded value has been pegged at about Rs 5.4 lakh crore, as of September 30, 2021, by international actuarial firm Milliman Advisors. Under the embedded value method, insurance companies' present value of future profit is also included in its present net asset value (NAV).

LIC will not receive any money from the public offer, as the net proceeds from the offer will go to the Government of India. The IPO is 100 per cent offer for sale (OFS) by the GoI, with no fresh issue of shares by the LIC.

The document said the policyholder reservation portion shall not exceed 10 per cent of the offer size and that the employee reservation portion shall not exceed 5 per cent of post-offer equity share capital.

The LIC policyholders and LIC employees will be offered equity shares at a discount to the public issue price to be set by the company.

"Allocation to all categories, except the anchor investor portion and the retail portion, shall be made on a proportionate basis subject to valid bids received at or above the offer price, as applicable," the document said.

About the retail individual investors' (RIB) portion, the document said, "The allocation to each RIB shall not be less than the minimum bid lot, subject to availability of equity shares in the retail portion, and the remaining available equity shares, if any, shall be allocated on a proportionate basis."

"The objects of the offer are to achieve the benefits of listing the equity shares on the stock exchanges; and carry out the Offer for Sale of over 31.625 crore equity shares by Government of India. .

On Sunday, Tuhin Kanta Pandey, secretary, Dipam tweeted that "The DRHP of LIC IPO has been filed today with the SEBI. For filing valuation about 31.6 crore shares are on offer representing 5 per cent equity,"

"LIC has 66 per cent market share in new business premiums with 283 million policies and 1.35 million agents as of March 31, 2021," Pandey added in the tweet.