LIC is one step closer to its public listing after the government has confirmed that it will file the draft share sale documents to sell at least 5% of the insurer by next week.
DIPAM secretary Tuhin Kanta Pandey said that a minimum 5% of LIC’s shares will be sold through its IPO, which will be the largest-ever in India.
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Next Steps
The IPO will likely take place in March after SEBI grants its approval.
The actual number of shares will be specified in the share sale documents.
The final size will depend on the number of shares, which is very large.
The LIC share sale by March end is critical for the government to meet its shrunken asset-sales target of Rs 78,000 crore for this fiscal year- sharply lower than the Rs 1.75 trillion budgeted last year.
Significance To The Govt
Missing this mark would further complicate the government’s budget calculations.
Pandey said that the revised budget estimates have been determined after considering the potential proceeds from LIC’s IPO.
The revised disinvestment target indicates that the government expects to mop up at least Rs 60,000 crore from the IPO.
Meeting Reduced Target
Pandey said that it has raised Rs 12,000 crore so far including Rs 2,700 crore from Air India.
The main transaction left is LIC which will make up for the remaining and the government may also exceed its target but it all depends on the size, explained Pandey.
It was reported in November that LIC’s embedded value is likely around Rs 11 trillion or about $150 billion.
Pandey said that a chunk of the issue will be set aside for anchor investors like it has done for other state-run companies such as Indian Railway Finance Corp. and RailTel Corp. of India.
Another portion of the share will be reserved for the employees.
Upto 10% of the issue size will be reserved for policyholders.
Foreign Investors
The government is also considering bringing in foreign investors to pick up stake in LIC.
According to SEBI rules foreign portfolio investors (FPI) can buy shares in a public offer.
FDI policy would have to be tweaked for FPI investment in this IPO since LIC is a corporation and not an insurance company.
How Policyholders Can Participate
Policyholders require a PAN account linked to their LIC policy account and a Demat account in order to participate in the IPO.
They must ensure that their PAN details are updated in the Corporation’s records.
A valid DEMAT account is also necessary.
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