LIC IPO DRHP Live Updates: Life Insurance Corporation (LIC) may not file the Draft Red Herring Prospectus (DRHP) for its IPO (Initial Public Offering) today, according to market participants. Reports had earlier suggested that LIC’s board will meet today to finalize the details of the IPO, and eventually file papers with the market regulator SEBI. However, LIC is now expected to file its draft papers next week. The street is eyeing details including the issue size, OFS, and various investor quotas. The embedded value of LIC was finalized a week ago at over Rs 5 lakh crore. The public issue may help the government reach its revised divestment target of Rs 78,000 crore, cut down from the initial target of Rs 1.75 lakh crore. LIC’s IPO is expected to hit the street before the end of this fiscal year.
LIC has invested in multiple companies and government bodies which entails them to grow inorganically along with providing the companies with capital support. LIC also has 2 subsidiaries and 4 associate companies which looks after the pension fund, housing finance, banking, mutual funds, and cards business.
~ IIFL Securities
Reports claim that the government plans to keep a portion of LIC IPO for policyholders, who could also get discounts as the government wants to rope in a larger section of retail investors.
LIC owns a 3.69% stake in TCS at the end of October 2021 and a 2.68% stake in HDFC Bank.
ICICI Prudential, a listed insurance sector player has Embedded Value (FY21) of Rs 30,000 crore and Rs 80,000 crore mcap (Approx). This hints that the company trades at 2-3 times its EV. Similarly, LIC has an EV of Rs 5 lakh crore.
“The company’s 13-month Persistency Ratio increased to 67% in FY21 from 66% in FY19 indicating growth in the policyholders who paid their renewal premium,” said IIFL Securities.
“Government often intervenes in the business where maximum growth and income is involved, this might affect the decision making and utilisation of its resources. In the past the company has invested in many loss-making companies due to the policies laid down by the government.”
~ IIFL Securities
LIC reported a net profit of Rs 2,688 crore in the financial year ending March 2019. In FY2020 LIC reported a net profit of Rs 2,712 crore. In the previous fiscal year the PSU reported a profit of Rs 2,900 crore.
LIC IPO could help the government reach its divestment target of Rs 78,000 crore. So far this financial year the government has managed to raise Rs 12,000 crore from divestment receipts. Assuming the government raises the remaining Rs 66,000 crore from the LIC IPO with a 5% stake sale, that would value LIC entirely at Rs 13 lakh crore.
LIC's largest stock holding in percentage terms is Mukesh Ambani's Reliance Industries (RIL) with a 5.98% stake at the end of October 2021. The second-largest holding is IT-major Infosys with a 5.55% stake.
After listing, LIC will join HDFC Life Insurance, ICICI Prudential Life Insurance Company, Max Financial, and SBI Life among some of the major listed companies from the insurance space.
LIC is a household name in India. With 2,000 branches, more than 100,000 employees and 286 million policies, the Mumbai-headquartered company reaches practically every corner of the country.
For almost two years, India has steeled itself for a gargantuan task: readying the country’s premier insurer — with nearly $500 billion in assets and a valuation estimated as high as $203 billion — for what could become its biggest-ever stock listing.
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.
LIC IPO will entirely be an offer for sale (OFS) by the government of India and will not consist of a fresh issue of equity shares. The government is looking to dilute its stake in the company to raise funds.
Earlier last week, the state-run Life Insurance Corporation of India’s (LIC) embedded value was finalised at more than Rs 5 lakh crore ($66.82 billion).
LIC's DRHP will inform Dalal Street of how much the company is looking to raise from the primary market and what portion of it will be a fresh issue and how much will be the OFS portion.
LIC's new business premium market share stands at 66% currently. The closest to LIC's behemoth market share are HDFC Life and SBI Life with 7% market share each.
LIC may file the draft IPO papers with SEBI today. Market participants expect the state-run company to finalise its offer and seek SEBI's nod as it gears up for the largest IPO for domestic markets.
