While the mega initial public offer (IPO) of Life insurance Corporation will now happen only in next financial year, chances are that the issue will hit the market by mid-May, if market conditions are stable. This is because any further delay could necessitate additional regulatory requirements, official sources said.
With the current set of approvals from market regulator Sebi, LIC can bring the IPO before May 12. The only additional requirement till then will be an addendum to the draft red herring prospectus on the insurer’s December quarter results, an official said. He, however, added that if the issue is delayed further, then the DRHP would need major changes, including an updated embedded value of the insurer.
The DRHP filed by LIC on February 13 pegged its embedded value at Rs 5.4 lakh crore. Sebi approved the draft prospectus on March 9.
“On an end to end basis, it will require 15 days for an IPO process to conclude. We don’t have much time left in March to do the transaction given market uncertainties,” the official said, confirming the issue won’t hit the market in the current financial year.
The market volatility after the outbreak of Ukraine-Russia war has forced the government to review the proposed LIC IPO on concerns that foreign investors and retail investors may stay away from the issue.
The government hopes to raise Rs 65,000-70,000 crore through the IPO, by offloading 5% stake in the insurer.
LIC has reserved 50% of the net offer (after excluding the portion reserved for policyholders and employees) for qualified institutional buyers or QIBs, 15% for non-institutional bidders and 35% for retail individual bidders in accordance with the Sebi regulations. Foreign institutional investors are part of the QIB portion.
Deferment of LIC IPO, however, may not lead to the Centre breaching fiscal deficit estimate of 6.9% of GDP for FY22. Thanks to buoyancy in tax revenues, the Centre’s net tax revenues could be higher than the revised estimate by around Rs 80,000 crore, offsetting the shortfall in non-tax receipts on account of the postponement of LIC IPO.
