Life Insurance Corporation (LIC) will file a draft red herring prospectus (DRHP) as early as Thursday for its mega initial public offer (IPO), department of investment and public asset management secretary Tuhin Kanta Pandey told FE on Tuesday.
LIC, whose embedded value (EV) was finalised at over Rs 5 lakh crore, will file the DRHP on “Thursday or Friday”, Pandey said.
The LIC IPO, which could potentially bring down the Centre’s revised FY22 fiscal deficit of 6.9% of GDP by a notch, will be the country’s biggest ever.
In the revised estimate (RE) for FY22, the government has scaled down the disinvestment receipt for the current financial year to Rs 78,000 crore, about 56% lower than the initial estimate of Rs 1.75 lakh crore. So far in FY22, the government has collected only Rs 12,030 crore in disinvestment receipts.
Speaking with FE, finance secretary TV Somanathan had said that a very conservative estimate of LIC IPO receipt is included in the RE as neither the valuation, nor the size of the issue was known at the time of fixing the estimate. Sources indicated that only Rs 60,000 crore from the LIC IPO was factored in the disinvestment RE for FY22.
The valuation of life insurance companies is usually 3 to 5 times higher than their embedded value. So, LIC’s valuation could be in excess of Rs 15 lakh crore. So, even a 7-10% stake sale could fetch Rs 1.05-1.5 lakh crore if its value is estimated at around Rs 15 lakh crore.
The government plans to keep a portion of IPO for LIC policyholders, who could also get discounts as the government wants to rope in a larger section of retail investors. Similarly, the government is in the process of approving a 20% foreign investment limit in LIC to rope in foreign investors to make the IPO a huge success.
With most of the preparatory work done in consultation with market regulator Sebi, Pandey had said earlier that its approval for LIC IPO could come in quickly after the DRHP is filed.
The IPO is expected to hit markets by mid-March.
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