DIPAM (Department of Investment and Public Asset Management) states that the LIC IPO is going to be the biggest initial public offering that the Indian stock market has ever witnessed. In fact, after the largest insurer in the country lists its shares on the bourses, the company’s market valuation may climb up to the ranks of top companies like TCS and RIL. Post analysis of the current listing situation of the market, DIPAM will likely meet investment bankers today to talk about this mega IPO.
What Does the Analysis of DIPAM Signify?
The Government appointed DIPAM (Department of Investment and Public Asset Management) to conduct a stock market assessment prior to the much-awaited public offering. Going by the firm’s analysis, the listing situation of the largest insurance company in India, LIC, is conducive.
Thus, as per sources, the Government is likely to file an updated DRHP with the market regulator SEBI for the LIC IPO. In addition, it has also finalised to liquify 5% of the company’s stake.
Closer Insight into the Government’s Plan Regarding LIC IPO
According to the Finance Minister of India, Nirmala Sitharaman, the Government wants to float the LIC IPO by May 2022. In fact, the committee is ready to declare its final decision and approve the insurance giant to proceed with this IPO.
The Government expects to sell off a 5% stake in LIC and collect Rs. 63,000 crores. It plans to use the proceeds from this public issue to cater to the disinvestment target created in 2022, i.e., Rs. 78,000 crores.
The plan to sell 31.6 crore shares of LIC to the public was originally scheduled for March 2022. However, the Russia-Ukraine crisis delayed it by creating high volatility in the stock market. The Government has to launch this IPO by 12 May 2022. If it fails to do so, the Government must file fresh draft papers with SEBI (Securities and Exchange Board of India). For this purpose, it may have to present the financial result of LIC for the December quarter of FY 22 and provide them with an embedded value.
What Is the Expected Embedded Value of LIC?
The embedded value of LIC denotes the total value of the interest of shareholders in the insurance company. The international actuarial firm Milliman Advisors reported a pegging order amounting to Rs. 5.4 lakh crores as of 30 September 2021. So, keeping the industry standard in mind, LIC is likely to embed 3 times this value. However, the DRHP contains no such disclosure regarding this market valuation of LIC.
After proper analysis, DIPAM found that the current market condition is in favour of the LIC listing. The firm is proceeding to discuss the same with the investment bankers. This means that the Government of India will soon be filing updated draft papers with SEBI for the biggest IPO in the millennia.
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Frequently Asked Questions
How many portions of LIC IPO will it reserve for anchor investors?
Life Insurance Corporation plans to reserve a portion of up to 10% for anchor investors.
What is the estimated issue size of LIC IPO?
The issue size of the LIC IPO is likely to range between Rs. 53,500 crores and Rs. 93,625 crores.
What will be the issue price band of LIC IPO?
The issue price of shares in this mega IPO may range from Rs. 1,693 to Rs. 2,962 apiece.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.