LIC IPO Can Be Priced Rs 950-1000 Per Share; IPO Launch In May 1st Week? New DRHP Filed By Govt With Reduced Issue Size

The government has filed a fresh draft red herring prospectus (DRHP) with Sebi for the LIC IPO.

It will likely file a red herring prospectus (RHP) early next week.

Sebi approval on the updated DRHP is expected on Monday.

Diluted Govt Stake

The IPO is set to take place in the first week of May.

Its board has also approved reducing the issue size.

So now the government will dilute its 3.5 per cent stake for Rs 21,000 crore, compared with the 5 per cent proposed in the draft papers.

It is likely to price LIC IPO at Rs 950-1,000 per share and the IPO will value LIC at around 1.1X price/ embedded value.

IPO Size

The government will offload its 5 per cent stake through the IPO.

The stake dilution has been reduced to 3.5 per cent for Rs 21,000 crore, valuing the country’s largest insurer at Rs 6 lakh crore.

IPO is also likely to have a greenshoe option of Rs 9,000 crore.

Greenshoe option refers to an over-allotment option which gives the company a choice to retain excess subscription and helps it adjust the public issue as per demand and market conditions.

IPO Date

It’s likely to happen in the first week of May.

The government filed fresh draft papers for the IPO last month.

It now has time till May 12 to launch the offer, after which it will have to file fresh papers with Sebi.

The Centre will declare the results of the December quarter and also update the embedded value.

As on September 31, 2021 the embedded value of LIC was Rs 5.39 lakh crore.

Reserved Quota

Retail investors are eligible to participate in about 35 per cent of the IPO issue size.

15 per cent will be reserved for non-institutional investors.

Around half of the issue is fixed for qualified institutional buyers (QIBs) out of which 60 per cent has been earmarked for anchor investors on a discretionary basis.

From this 60 per cent, one-third will be reserved for domestic mutual funds.

Up to a maximum of 10 per cent will also be reserved for the policyholders.

For employees 5 per cent will be reserved.

Both employees and policyholders will be able to book LIC IPO at a discounted rate.

Biggest So Far

This will be the biggest IPO ever in India, despite a reduced size of Rs 21,000 crore.

Till date the record was held by Paytm at Rs 18,300 crore in 2021, followed by Coal India Ltd at Rs 15,500 crore in 2010 and Reliance Power at Rs 11,700 crore in 2008.