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LIC IPO: The Government Could Sell LIC Stake in Two Phases to Avoid Crowding Out

05 August 20223 mins read by Angel One
LIC IPO: The Government Could Sell LIC Stake in Two Phases to Avoid Crowding Out
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LIC IPO is among the most awaited initial public offerings in the country.

For good reason!

It is not every day the Central Government decides to dilute its stake in one of the most recognised companies in the country.

LIC IPO is expected to go live in the first half of the next fiscal year. Since the IPO has garnered substantial attention in the market, the government fears crowding out of private companies. As a means to manage the impending situation, the central government has decided to dilute its 10% stake in LIC in two stages.

Take a quick look below to know more.

Stages of LIC IPO – At a Glance

It is expected that to avoid overcrowding of private companies at this upcoming initial public offering, the government could break the IPO into two stages.

As per speculations, this insurance company could sell 5% to 6% of its stake through an initial public offering. On the other hand, this company could dilute its remaining stake through a follow-on public offering or FPO.

But, is that all?

It is expected that LIC will be valued at Rs. 12 lakh crores to Rs. 15 lakh crores. Now, a 10% stake in this company would mean an IPO worth around Rs. 1.2 crores to Rs. 1.5 lakh crores.

The government is concerned that such a valuation and IPO size will likely crowd out private companies in the equity market. As a result, it could impact economic growth negatively.

It seems that the government is taking its sweet time to finalise the size and scope of this upcoming IPO. Experts believe this could be an attempt to regulate the implications of the public offering and its probable impact on the economy.

Final Takeaway

Experts believe it could prove to be a wise move for the government to dilute its 10% stake in LIC in multiple stages. Such a move could allow this insurance company to command an attractive premium in its follow-up public offering next year.

Some suggest that the government can benefit by diluting its stake over the next few years to command a robust premium and meet regulatory norms successfully.

Accordingly, those willing to invest in this massive IPO should keep a close tab on its developments to gauge the market temperament and align subscription decisions.


Frequently Asked Questions

  1. Who will decide on IPO details and timeline?

IPO size, timeline and pricing will be decided by a panel headed by Nirmala Sitharaman, the Finance Minister of India.

  1. When will LIC IPO be open for public subscription?

It is expected that LIC IPO could be open for public subscription as early as the next calendar year.

  1. Which categories of investors are allowed to participate in this LIC IPO?

Qualified institutional buyers, non-institutional investors and retail individual investors are allowed to partake in this upcoming IPO.

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