LIC IPO | Key things to know about state-owned insurance behemoth

The government-run Life Insurance Corporation of India (LIC) filed Draft Red Herring Prospectus (DRHP) with SEBI on Sunday, February 13, for its initial public offering (IPO), which is expected to hit the capital market in March.

There are currently 24 life insurance companies in India, with LIC being the sole public player. The company's promoter is the President of India, acting through the Ministry of Finance.

The government, while targeting Rs 1.75 trillion receipts for this year, had expected completion of big ticket privatisation proposals. Now, that target has been slashed to ₹78,000 crore. The government had earlier planned to raise Rs 800-900 billion from stake sale in LIC.

The embedded value of LIC as of September 30, 2021, is Rs 5.4 trillion. LIC shares will list on the bourses upon successful completion of the IPO.

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The government owns 100 percent stake in LIC, whose total equity is around 632 crore shares. The government plans to sell 31.6 crore shares, representing 5 percent equity, through an offer for sale. The IPO is entirely an offer for sale by the government of India and no fresh issue of shares by LIC.

The employee reservation portion will not exceed 5 per cent of the post-offer equity share capital, while the policyholder reservation portion will not exceed 10 per cent of the offer size. Up to 60 percent of the Qualified Institutional Buyers portion will be allocated to anchor investors, while one-third of the anchor investor portion will be reserved for domestic mutual funds.

The objects of the offer are to achieve the benefits of listing the equity shares on the stock exchanges and carry out the offer for sale by the selling shareholder (President of India). The selling shareholder will be entitled to the entire proceeds of the offer after deducting the offer expenses and relevant taxes thereon.

The government has picked 10 investment banks to handle the initial public offering. They are Kotak Mahindra Capital, Axis Capital, BofA Securities, Citigroup Global Markets India, Nomura Financial Advisory and Securities, Goldman Sachs (India) Securities, ICICI Securities, JM Financial, JP Morgan India and SBI Capital Markets. Sixteen banks, including seven global and nine domestic, had been in the race to handle the IPO.