The government offered to sell a 5% stake in Life Insurance Corporation (LIC) in the draft red herring prospectus (DRHP) filed with the market regulator Sebi on Sunday. A senior official told FE that the IPO size could be enhanced to 7.5% in the final offer document after guaging investor appetite.
According to the DRHP, the government will offer to sell 316.25 million shares of face value of Rs 10 each out of its total holding of about 6.32 billion shares in the insurer. The offer includes reservation of shares for LIC employees and policyholders, who would also get a discount on the offer price.
With the embedded value estimated at Rs 5.4 lakh crore, 5% stake could fetch the government around Rs 81,000 crore, compared to Rs 60,000 crore factored into the revised estimate for disinvestment receipts in FY22. The valuation of life insurance companies is usually 3 to 5 times the embedded value. So, LIC’s valuation could be over Rs 16.2 lakh crore. The valuation of the insurer will be known when the IPO price range is indicated at the RHP stage.
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