Tuhin Kanta Pandey, Secretary of Department of Investment and Public Asset Management (Dipam) said that government is all set to file the draft red herring prospectus (DRHP) or offer document this week for the forthcoming initial public offering (IPO) of state-run Life Insurance Corporation (LIC) and it may come with a discount for its millions of policyholders.
Tuhin Kanta Pandey, Secretary of Department of Investment and Public Asset Management (Dipam) said that government is all set to file the draft red herring prospectus (DRHP) or offer document this week for the forthcoming initial public offering (IPO) of state-run Life Insurance Corporation (LIC) and it may come with a discount for its millions of policyholders.
29 Crores Policyholders Can Get This Discount
He mentioned about the existing reservations. There are policyholders’ window and provisions have been made under the LIC Act that up to 10% of the issue can be offered to policyholders at some discount on the competitive basis. He added that there are going to be reservations for employees also.
Two people who are close to transaction advisors for the IPO, said on the condition of anonymity, that some concessions may also be expected for retail investors and employees. The possibility of a discount to LIC policyholders was confirmed by Pandey, however he did not comment on other categories of investors.
Discounts To Encourage The Common Man
One of the above anonymous source said that the intention behind the discounts offered to small investors in the proposed IPO of LIC is the government’s intention to encourage participate of the common man. The advisors expect the size of the issue to be between 5% and 10%.
Pandey said that a minimum 5% government’s stake will be diluted in LIC through the IPO, however the exact figure shall be revealed by DRHP.
He added that the government’s disinvestment receipts in the current financial year might also cross the revised estimates (RE) figures and that the reduction in expected disinvestment proceeds in the revised estimates (RE) stage of 2021-22 has nothing to do with the IPO size and valuation of LIC.
The original budget estimate (BE) had a disinvestment target of ?1.75 trillion which was later trimmed to ?78,000 crore for 2021-22 in the budget which was presented on 1 February.
The disinvestment target (in BE of 2022-23) is also conservative at ?65,000 crore.
However, actual receipts as well as estimates of disinvestment targets could differ because of various reasons and it should not be correlated with the size of LIC’s IPO.
He mentioned about the existing reservations. There are policyholders’ window and provisions have been made under the LIC Act that up to 10% of the issue can be offered to policyholders at some discount on the competitive basis. He added that there are going to be reservations for employees also.
Two people who are close to transaction advisors for the IPO, said on the condition of anonymity, that some concessions may also be expected for retail investors and employees. The possibility of a discount to LIC policyholders was confirmed by Pandey, however he did not comment on other categories of investors.
One of the above anonymous source said that the intention behind the discounts offered to small investors in the proposed IPO of LIC is the government’s intention to encourage participate of the common man. The advisors expect the size of the issue to be between 5% and 10%.
Pandey said that a minimum 5% government’s stake will be diluted in LIC through the IPO, however the exact figure shall be revealed by DRHP.
He added that the government’s disinvestment receipts in the current financial year might also cross the revised estimates (RE) figures and that the reduction in expected disinvestment proceeds in the revised estimates (RE) stage of 2021-22 has nothing to do with the IPO size and valuation of LIC.
The original budget estimate (BE) had a disinvestment target of ?1.75 trillion which was later trimmed to ?78,000 crore for 2021-22 in the budget which was presented on 1 February.
The disinvestment target (in BE of 2022-23) is also conservative at ?65,000 crore.
However, actual receipts as well as estimates of disinvestment targets could differ because of various reasons and it should not be correlated with the size of LIC’s IPO.
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