Life Insurance Corporation of India, the country’s biggest insurance provider, is finally filing its DRHP to initiate IPO proceedings. A Finance Ministry official has confirmed that the insurance behemoth will submit its papers in November 2021, and the IPO is expected to be wrapped up by the end of this fiscal year.
The initial public offering of LIC has been on the cards from the start of this financial year, and there have been several reports about the same, but no official confirmation was received from any side. However, this process gathered pace in recent months, specifically after the second wave of Covid-19 dialled down. In the previous month, the company announced the appointment of lead managers.
Here is a list of banks that are in charge of managing this public issue –
- Goldman Sachs (India) Securities Private Limited
- Nomura Financial Advisory and Securities (India) Private Limited
- Citigroup Global Markets India Private Limited
- JM Financial Limited
- SBI Capital Market Limited
- BofA Securities
- Axis Capital Limited
- Kotak Mahindra Capital Co. Ltd.
- JP Morgan India Private Limited
- ICICI Securities Limited
Furthermore, the Government has appointed Cyril Amarchand Mangaldas as the legal advisor of this public issue. After filing the draft red herring prospectus, the merchant bankers will begin advertising about this IPO globally.
The LIC IPO has been under consideration for a long time, but finding the correct valuation of the company has also been a tough ask. The Finance Ministry is in the due process of finding this insurance provider’s embedded value. Once this process is complete, the ministerial disinvestment panel will decide on its size.
Why has Valuing LIC been a Difficult Task?
The Indian Government has appointed actuarial firm Milliman Advisors LLP to find the embedded value of India’s largest insurance provider.
Life Insurance Corporation of India has $511 billion in assets, which is equal to the country’s total mutual fund market. Here, the advisory firm needs to go through millions of policies against different parameters such as lapses, morbidities, mortalities, and surrenders. Additionally, this firm needs to consider LIC’s fixed property across 2000 branches.
LIC only releases its balance sheet once a year, and it is difficult to figure out its actual embedded value from it. The primary parameters for insurers, which combine the net value of assets, and the current value of future profits, are not clearly visible on its balance sheet.
Furthermore, a peer-to-peer comparison is also not easy for LIC. This insurance provider is governed by a 1956 Parliamentary Act, not the regular laws that govern other insurance firms. Resultantly, insurance policies offered by LIC are covered by a sovereign guarantee.
What could be LIC’s Valuation?
With this initial public offering, the Government is targeting a valuation of Rs. 8 to Rs. 10 trillion. In this regard, a 5% dilution will make this LIC IPO the biggest yet in this country, and a 10% disinvestment will make it the biggest public issue in the global insurance sector.
On the other hand, analysts at Jeffries have predicted a Rs. 19 trillion valuation of LIC with this IPO. RBSA Investors are expecting a Rs. 10 to Rs. 11.6 trillion valuation of India’s insurance behemoth with this public issue.
LIC IPO is a part of the Indian Government’s plan to raise Rs. 1.75 trillion through disinvestment of state-owned firms and various assets. Nonetheless, looking at LIC’s market position and how this company is synonymous with insurance policies in this country, one can only estimate the demand for its shares.
Individuals can refer to Angel One blogs for further updates of this initial public offering.
Frequently Asked Questions
- Who is the registrar of this LIC IPO?
KFin Technologies Private Limited is the registrar of this public issue of LIC of India.
- Can foreign investors buy a stake in LIC?
No, under the current regulations, no foreign investor can buy a stake in LIC.
- What is the face value of LIC’s shares?
No information regarding the face value of LIC’s shares is available yet.