State-run Life Insurance Corporation of India (LIC) has confirmed its plans to create policyholder and employee quotas and offer them discount to issue price in its much-awaited draft papers filed today.
The portion reserved for policyholders can go up to maximum of 10%. The draft prospectus stated, “The aggregate of reservations for eligible policyholder(s) shall not exceed 10% of the offer size.”
Employee quota is capped at 5%. The quantum of discount will be specified closer to the bid opening date, at least two days prior.
LIC will be selling 31.6 crore shares, according to the draft prospectus dated February 13. The filing also stated an embedded value of ₹5.4 lakh crore.
Under the embedded value method, insurance companies’ present value of future profit is also included in its present net asset value (NAV).
The IPO is 100% offer for sale (OFS) by the Government of India and no fresh issue of shares by Life Insurance Corporation (LIC).
The IPO of LIC is expected by March and the proceeds would be crucial to meet the revised disinvestment target of ₹78,000 crore for the current fiscal.
So far, the government has raised ₹12,030 crore through CPSE disinvestment and Air India strategic sale this fiscal.
The government has appointed 10 merchant bankers, including Kotak Mahindra Capital, Goldman Sachs (India) Securities Pvt Ltd, Citigroup Global Markets India Pvt Ltd and Nomura Financial Advisory and Securities (India) Pvt Ltd, to manage the mega IPO of the country’s largest insurer.
The government is also mulling allowing foreign investors to pick up stake in LIC. As per Sebi rules, foreign portfolio investors (FPI) are permitted to buy shares in a public offer.
FDI policy would have to be tweaked for FII/FPI investment in this IPO, as LIC is a corporation and not an insurance company.
The listing also comes against the backdrop of foreign investors pulling out funds from the domestic market just as the Narendra Modi-led government seeks to meet a sharply trimmed divestment target for the current financial year.
The company said its investment in government securities and T-Bills stood at 61.44 billion Indian rupees at September 30.
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