Moneycontrol PRO
Open App
you are here: HomeNewsBusinessIPO

LIC IPO: Govt files draft papers with SEBI for mega listing; All eyes on March launch

LIC IPO: In Budget 2022, the government set a disinvestment target of Rs 65,000 crore for the next fiscal year. It also lowered the current fiscal year's target from Rs 1.75 lakh crore to Rs 78,000 crore. Back in July 2021, the Cabinet Committee on Economic Affairs had cleared the proposal for LIC's IPO.

February 13, 2022 / 11:21 PM IST

The Union government on February 13 has filed the draft red herring prospectus (DRHP) of state-owned Life Insurance Corporation of India with market regulator SEBI to launch the much awaited IPO before the end of March.

Moneycontrol had reported on the move earlier in the day.

The issue is expected to help the government meet its revised disinvestment target of Rs 78,000 crore for the fiscal year and also tap a legion of new retail investors.

Importantly, the DRHP does not indicate the size of the issue or throw light on the valuations as discussions with investors are still going on. It is a 100 percent offer for sale by the government with no fresh issue of shares of LIC. Around 31.6 crore shares are on offer representing 5 percent of the firm’s equity.

The embedded value (a metric used for life insurance firms which represents the sum of present value of all future profits from the existing business and shareholders’ net worth) though has been mentioned and stands at around Rs 5.39 lakh crore as on September 30, 2021. The enterprise value would be multiples of the embedded value.

Close

LIC had 66 percent market share in new business premiums with 283 million policies and 1.35 million agents as of 31st March, 2021.

Clarity on potential discounts for policyholders, employees and others is likely to be provided closer to the launch of the firm’s IPO. 

Following are few takeaways from the summary of the offer document filed with SEBI -

Objects of the Offer

The objects of the Offer are to (i) achieve the benefits of listing the equity shares on the stock exchanges; and (ii) carry out the offer for sale of up to 316,249,885 equity shares by the Selling Shareholder. The Selling Shareholder (President of India acting through the Ministry of Finance, Government of India) will be entitled to the entire proceeds of the Offer after deducting the Offer expenses and relevant taxes thereon. Our Corporation will not receive any proceeds from the Offer.

Primary business of our Corporation

Our Corporation has been providing life insurance in India for more than 65 years and is the largest life insurer in India, with a 64.1% market share in terms of premium (or GWP), a 66.2% market share in terms of new business premium (or NBP), a 74.6% market share in terms of number of individual policies issued, a 81.1% market share in terms of number of group policies issued for Fiscal 2021, as well as by the number of individual agents, which comprised 55% of all individual agents in India as at March 31, 2021.

Primary industry in which our Corporation operates

There are currently 24 life insurance companies in India, with Life Insurance Corporation being the sole public player. The size of the Indian life insurance industry was Rs 6.2 trillion on a total-premium basis in Fiscal 2021, up from Rs 5.7 trillion in Fiscal 2020. The industry’s total premium has grown at 11% CAGR in the five years ended Fiscal 2021. CRISIL Research forecasts the industry’s total premium to grow at 14-15% CAGR over the next five years, to reach close to Rs 12.4 trillion by Fiscal 2026.

Details of pre-IPO placement

Our Corporation does not contemplate any issuance or placement of Equity Shares from the date of this Draft Red Herring Prospectus until the listing of the Equity Shares.

It doesn’t get bigger than this!

Based on final discussions with investors, it is widely expected that the LIC IPO will be the biggest ever in the history of the domestic capital markets. In November, Paytm broke the record for the largest domestic IPO with its Rs 18,300-crore issue. Prior to that, the record was held by Coal India which raised around Rs 15,000 crs via an IPO in 2010. In December 2019, Saudi Arabian government owned oil major Saudi Aramco raised $25.6 bn in the world’s biggest ever IPO.

In September, the government had appointed 10 merchant bankers for the IPO namely Kotak Mahindra Capital, JP Morgan, Citi, BofA Securities, Nomura, ICICI Securities, Axis Capital, JM Financial, Goldman Sachs and SBI Caps. Cyril Amarchand Mangaldas and Shardul Amarchand Mangaldas are the legal advisors.

Actuarial firm Milliman Advisors LLP India was engaged by the government for assessing the embedded value of LIC, while Deloitte and SBI Caps were appointed as pre-IPO transaction advisors.

In Budget 2022, the government set a disinvestment target of Rs 65,000 crore for the year. It also lowered the current fiscal year's target from Rs 1.75 lakh crore to Rs 78,000 crore. Back in July 2021, the Cabinet Committee on Economic Affairs had cleared the proposal for LIC's IPO.
Ashwin Mohan
first published: Feb 13, 2022 07:36 pm
Sections
ISO 27001 - BSI Assurance Mark