Life Insurance Corporation of India filed a draft red herring prospectus with Securities Exchange Board of India (Sebi) to raise funds via initial public offering. Currently, the government holds 100% stake in the firm. This maiden share sale should fetch the government between Rs 60,000 crore and Rs 75,000 crore, which could peg the insurer’s market value between Rs 12 trillion and Rs 15 trillion. The final valuation will be decided closer to the IPO. In the DRHP filed with the market’s regulator Sebi, LIC has said that the government will offload 316.25 million shares of its over 6,325 million shares. The government owns 100 percent of LIC. Kotak Mahindra Capital, Axis Capital, Bofa Securities, Citigroup Global markets India, Nomura Financial Advisory, Goldman Sachs India Securities, ICICI Securities, JM Financial, JP Morgan India, SBI Capital. The IPO is 100 per cent OFS (offer for sale) by the Government of India and no fresh issue of shares by LIC. For filing valuation about 316 million shares are on offer, representing 5 per cent equity.
LIC has a 66 per cent market share in new business premia with 283 million policies and 1.35 million agents as of March 31, 2021. The embedded value of LIC as of September 30, 2021, is Rs 5,39,686 crore (about Rs 5.4 trillion). Since the offer is an OFS, LIC will not receive any proceeds from the public issue. The proceeds from the public issue of LIC are crucial for the government to meet its disinvestment target. The government has lowered its FY22 disinvestment target to Rs 78,000 crore from the initial projection of Rs 1.75 trillion. The Centre has, so far, mopped up about Rs 12,000 crore through disinvestment. And upto 10% of LIC IPO issue size reserved for policy holders. Actuarial firm Milliman Advisors LLP India had worked out the embedded value of LIC, while Deloitte and SBI Caps have been appointed as pre-IPO transaction advisors. A range of embedded value multiple between 2-3.5 throws up a valuation for the corporation ranging from Rs 10.7 lakh crore to Rs 18.7 lakh crore. Based on the total equity capital of 632 crore share, the issue size for a 5% offer for sale works out to Rs 53,500 crore to Rs 93,625 crore. The per share price thus works out to Rs 1693 to Rs 2962.