A big development has occurred regarding the Initial Public Offering (IPO) of the Life Insurance Corporation of India (LIC). The government is likely to reserve 10 per cent share for LIC policy holders in the public issue. More than 1 cr new Demat accounts to open before the launch of the IPO. Zee Business’ Anurag Shah has this BIG BREAKING NEWS! He said that the DIPAM Secretary had earlier in an interview indicated that there will be a 10 per cent reservation for LIC policy holders.
The Finance Minister Nirmala Sitharaman had already announced in her Budget 2021 speech that the LIC IPO will be brought in FY22. Shah said that there will be a reservation of shares for LIC policy holders, he said citing his sources in LIC. He further said that Department of Investment and Public Asset Management (DIPAM) has indicated that there will be a 10 per cent reservation for the LIC policy holders in the IPO
LIC IPO Date
LIC IPO is one of the most eagerly awaited IPO of the decade and all are keen to know of its launch date. As per the budget announcement, the IPO is likely to be launched in the second half of FY 2020-21.
The process that was slowed down due to the pandemic has now kick-started in full swing. The government has finalized Deloitte as the pre-initial public offer (IPO) transaction advisors. There is still a lot of work to be completed in the pre-IPO phase and we will have to wait for the dates to be announced.
LIC IPO Size
The government is expected to sell not more than 10% of its stake in LIC. The rough estimates of valuation done by analysts vary between Rs 8 lakh crores to Rs 11 lakh crores. Considering the government sells 10% of its stake, the IPO size can be expected to range between Rs 80,000 to 1 lakh crore. Though this is based on estimates we may have to wait for actual valuations to be done which is going to be a mammoth task.
LIC IPO Price
The price band for IPO can be determined based on the actual valuation and the existing share price of the competitors in the insurance industry. The issue price is usually announced one week before the issue opens for the public for subscription.
LIC IPO Valuation
Various analysts have provided rough estimates on the valuation of LIC to be between Rs.8 lakhs to 11 lakhs crores. However, the government will need to arrive at the actual value of LIC before filing DRHP.
The process to determine the actual valuation of LIC is going to be a tough task considering the giant size of the company. It will need a team of professionals with sound knowledge of the insurance industry.
LIC IPO Advantages and Disadvantages
Amidst all the mixed opinions whether the decision to disinvest LIC is good or bad, LIC IPO has below benefits to offer:
- It will enhance transparency and governance in LIC’s operations.
- It will help attract foreign capital to the insurance industry.
- Retail investors and employees can be part of the wealth created by the insurer by participating in its equity.
- With government selling not more than a 10% stake in LIC, the government will still be the major stakeholder and there will be no change in its ownership. The IPO is not intending to have any impact on the policyholders and employees.