Sebi considers exempting LIC from mandatory 5% float in IPO

The government, which has time till May 12 to launch the LIC IPO without filing fresh papers with the market regulator, will not launch a follow on public offering (FPO) for a year after listing even as the watchdog considers exemption sought from compulsory five percent listing on float, sources told CNBC-TV18.

Under the current rules, if the post-issue capital of a company calculated at the offer price is above Rs 1 lakh crore, it's required to issue shares worth Rs 5,000 crore and five percent of equity.

If the offer is less than that calculated under this norm for large companies, the government will need exemption from the watchdog.

The five percent IPO norm could result in a Rs 35,000 crore issue, and it is unlikely that the market would have the appetite for a public issue of that size.

This comes after Bloomberg reported on April 22 the size of the IPO may be slashed by 40 percent from Rs 55,000-60,000 crore to Rs 30,000 crore.

Typically, firms can't do an FPO for six months after float.

LIC had filed its draft papers for IPO on February 13. The government has time till May 12 to launch the LIC IPO without filing fresh papers with market regulator Securities and Exchange Board of India and if it misses the window LIC would have to file fresh papers with SEBI giving the results of December quarter and updating the embedded value.

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The sale of 31.6 crore shares in the country's largest insurer was originally planned for March but the Russia-Ukraine war postponed it. The issue will reserve 35 percent of its offer for retail investors, 10 percent for policyholders, and five percent for LIC.

The IPO would contribute a major chunk to the budgeted divestment proceeds in the current fiscal year. The government has pegged divestment receipts at Rs 65,000 crore for 2022-23, up from Rs 13,531 crore last fiscal.