Markets regulator Sebi has given approval to mega IPO proposal of Life Insurance Corporation (LIC) to help the government mobilise about Rs 63,000 crore to meet the disinvestment target for the current fiscal year, sources said. Sebi has given its nod to draft red herring prospectus (DRHP) filed by LIC on February 13, 2022, sources said.

The go-ahead from the Securities and Exchange Board of India (Sebi) has come in less than a month, fastest ever to any company.

Going by the DRHP, the initial public offering (IPO) would see sale of 31.6 crore shares or 5 per cent stake of the government. Also employees and policyholders of the insurance behemoth would get a discount over the floor price.

LIC’s embedded value, which is a measure of the consolidated shareholders’ value in an insurance company, has been pegged at about Rs 5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors.

Although the DRHP does not disclose the market valuation of LIC, as per industry standards, it would be about 3 times the embedded value or around Rs 16 lakh crore.

The IPO is offer for sale (OFS) by Government of India and there will be no fresh issue of shares by LIC. The government holds 100 per cent stake or over 632.49 crore shares in LIC. The face value of shares is Rs 10 apiece.

The LIC IPO would be the biggest IPO in the history of Indian stock market and once listed, LIC’s market valuation would be comparable to top companies like RIL and TCS. So far, the amount mobilised from IPO of Paytm in 2021 was the largest ever at Rs 18,300 crore, followed by Coal India (2010) at nearly Rs 15,500 crore and Reliance Power (2008) at Rs 11,700 crore.

As per norms, up to 5 per cent of the issue size can be reserved for employees and up to 10 per cent for policyholders. The IPO of LIC is expected by March and the proceeds would be crucial to meet the revised disinvestment target of Rs 78,000 crore for the current fiscal year. So far, the government has raised Rs 12,030 crore through CPSE disinvestment and Air India strategic sale this fiscal year.

LIC share capital was raised from Rs 100 crore to Rs 6,325 crore during September last year to help facilitate the IPO. Last month, LIC reported a profit after tax of Rs 1,437 crore for the first half of  2021-22 as compared with Rs 6.14 crore in the year-ago period. Its new business premium growth rate stood at 554.1 per cent in the first half of 2021-22, compared with 394.76 per cent during the year-ago period.

There are currently 24 life insurance companies in India, with LIC being the sole public player. The size of the Indian life insurance industry was Rs 6.2 lakh crore on a total-premium basis in fiscal 2021, up from Rs 5.7 lakh crore in fiscal 2020.

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