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The government has set the price band for the initial share sale of state-run Life Insurance Corp. of India (LIC) at ₹902- 949 a share, with a ₹60 discount for policyholders and ₹45 for employees. The government expects to raise about ₹21,000 crore at the upper end of the price band in what would be India’s largest such sale.
According to officials aware of the decisions taken during a high-level meeting on Tuesday, the government will sell 3.5% of LIC, or 221.3 million shares. Out of this, 22 million shares will be reserved for policyholders and 1.5 million for employees of the insurance behemoth.
The IPO will open for subscription to the public from 4 May till 9 May, with allotment to anchor investors on 2 May.
“Excluding reservations, the remaining shares will be allocated in the ratio of 50% to qualified institutional buyers (QIB), 35% to retail investors and 15% to non-institutional investors," the official said, asking not to be named. “Sixty percent of the QIB allotment will be reserved for anchor investors," he added.
Mint reported on Tuesday that the LIC IPO received ₹13,000 crore worth of investment commitments from anchor investors, more than twice the value of shares offered to such investors.
The government’s stake sale in India’s largest insurer is still much lower than the minimum 5% stake sale it had initially planned. Geopolitical tensions, soaring oil prices and monetary tightening by major central banks have made global investors skittish about emerging markets stocks, crimping demand for LIC’s shares.
Waning investor demand after Russia’s invasion of Ukraine has also squeezed valuations.
The government has decided not to sell more than a 3.5% stake for at least a year from the listing date to give investors enough time to discover the shares’ value after the listing.
Though commitments from anchor investors stand at around ₹13,000 crore, the final allotment to them will be around ₹6,300 crore as the issue size has been slashed by the government.
Institutional investors who fail to get shares during the anchor allotment process can procure shares of LIC from the qualified institutional buyers’ quota, which will offer shares worth at least ₹10,500 crore.
LIC’s IPO will be the first in the country to offer a 3.5% stake to the public, lower than the 5% regulatory minimum stipulated by the Securities and Exchange Board of India (Sebi).
LIC is valued at ₹6 trillion, which is just 1.1 times its original embedded value of ₹5.39 trillion, according to the government’s revised estimates.
Since the government will be selling a 3.5% stake, the insurer may be given an exemption from complying with Sebi’s rule that requires publicly traded companies to achieve a minimum public shareholding of 25% in five years.
The government and Sebi are discussing ways to relax the norm on minimum public shareholding for LIC, and according to the current discussions, LIC may be given more than five years, as a special exemption, to achieve the minimum public shareholding target. On 13 April, Mint first reported that the government had slashed the valuation it is seeking for LIC to make the initial share sale attractive.
Mint reported last week that the country’s largest insurer reported a stellar performance, with the first-year premium collection, a key metric, rising 7.9% to ₹1.98 trillion for the year ended 31 March.
LIC sold 21.7 million insurance policies in the year ended 31 March, 3.54% more than the previous fiscal, boosting its market share to 74.6% in terms of policies sold.