LIC IPO may open on May 4, aims to raise Rs 21,000 crore
NEW DELHI: The initial public offering (IPO) of state-run insurance behemoth LIC, the country’s largest-ever, is likely to open on May 4. The hope is to raise Rs 21,000 crore by diluting a 3.5% stake, sources said on Monday. The most awaited issue may open for anchor investors on May 2 and the overall issue may close on May 9. Sources said the dates would be formally announced on Wednesday morning or Tuesday late evening.
Keeping the choppy market conditions in view, the government has decided to dilute 3.5% from the earlier planned 5%. In terms of size, it is bigger than the Paytm IPO of Rs 16,600 crore. To ensure that the shares are attractive to retail investors and to leave some money on the table for listing gains, the government has settled for a lower valuation of Rs 6 lakh crore.
Earlier, the market had expected the government to sell shares valuing the corporation at around Rs 12 lakh crore. At a Rs 6-lakhcrore valuation, a 3.5% stake would fetch Rs 21,000 crore. Officials have defended the valuation, saying it is fair and attractive based on detailed feedback from analysts and experts. They have also said that in China, companies similar to LIC are trading at a multiple of 1.1 times their embedded value (EV), and at Rs 6 lakh crore, LIC’s valuation is 1.1 times its EV.
The EV( embedded value), a measure used to value life companies, is the net asset value plus the present value of future profits. The LIC IPO is the centerpiece of the government’s plans to raise Rs 65,000 crore from disinvestment in state-run companies in the current fiscal year.
The Centre had earlier planned to list the insurance giant in the fourth quarter of 2021-22, but choppy market conditions triggered by Russia’s invasion of Ukraine derailed those plans. The government decided to wait for some order to return in the stock market before moving ahead with the listing. It has a window available till May 12 based on the earlier filing to list LIC shares. There has been strong interest in LIC’s IPO given the importance of the insurance giant in the lives of citizens.
LIC has been running a campaign to get retail investors who have not participated in the capital markets to open demat accounts to take advantage of the reservation and discount. The campaign results have been encouraging, with the number of demat accounts increasing by 34 lakh. The government has been working on multiple fronts to ensure a bumper response to the country’s biggest IPO.