India’s Biggest IPO Is Launching On This Date; Rs 90,000 Crore To Be Raised, 2nd Biggest Company Will Born!

It is being reported that the LIC IPO will take place by mid-March after the insurer files a draft prospectus at the end of this month.

Government’s Stake Sale

The draft prospectus will provide the embedded value of LIC as well as the number of shares on offer.

The government intends to raise up to 900 billion rupees ($12.18 billion) from its stake sale, which makes the listing India’s biggest ever IPO.

It is planning to sell 5% to 10% of the company before the end of March.

Embedded Value And Final Valuation

Officials are working on the valuation which manages more than $450 billion of assets.

It is estimated to be around ? 15 lakh crore, while the embedded value of the insurer is likely to be more than ? 4 lakh crore.

The final valuation will ultimately take into account various parameters, including investor appetite, profitability outlook, and trends in the industry.

Once that is complete, they will issue a draft IPO prospectus for investors.

Becoming India’s Second Largest Company 

“The determination of final embedded value should be completed by month end,” one of the banking sources said.

Embedded value is a significant metric for insurers which combines the current value of future profits with the net value of assets and will determine the final valuation.

If investors agree with the calculations, LIC would become the country’s second largest company after Reliance Industries Ltd., with Tata Consultancy Services Ltd in the third position.

Significance To The Government

The IPO is critical to the government in its efforts to meet its Rs 1.75-lakh-crore divestment target and trim a budget deficit that’s widened during the pandemic.

So far, it has managed to raise just ? 9,240 crore through PSU disinvestment. 

It will also bring more transparency into the working of the state-run company.

Marketing Blitz Begins

In the meanwhile, the company has been going all out on its marketing efforts to drum up a huge response, by way of adjusting capital-markets rules, sending phone messages and publishing newspaper advertisements, etc.

It will also start roadshows from next month onwards which are likely to be all virtual, given the current pandemic situation.