The government will file the draft red herring prospectus (DRHP) for the initial public offering of Life Insurance Corporation of India (LIC) with the markets regulator by end of next week with an offering of at least 5% stake, a top official said, bringing the largest ever public listing to hit the Indian markets by March closer to fruition.
Tuhin Kanta Pandey, secretary of the department of investment and public asset management (DIPAM) told Mint in an interaction that while the DRHP will specify the quantum of shares that will be sold through the IPO, but a minimum of 5% of the shares will be put up for sale.
“The DRHP will be filed by end of next week. A minimum of 5% will have to be done... it will be decided depending on the size and the number of shares, which is very large,” he said.
The government is aiming to list the country’s largest life insurer by March, which will be crucial to meet its revised target of Rs 78,000 crore from disinvestments.
Finance minister Nirmala Sitharaman said in her Budget speech that LIC public issue will happen within this financial year. “The public issue of the LIC is expected shortly. Others too are in the process for 2022-23,” she said.
“It will be the largest ever IPO,” Pandey noted. Mint reported in November that the embedded value of the state-run insurer is likely at $150 billion around Rs 11 trillion.
Pandey clarified that the revised Budget Estimates of Rs 78,000 crore for FY22 have been arrived at after taking into consideration the potential proceeds from the LIC IPO.
“We’ve done Rs 12,000 crore including Air India’s Rs 2,700 crore, so the main transaction remaining is LIC which will make up for the remaining... we can exceed it (the target) also,” he added. This means that the public listing of LIC could rake in over Rs 60,000 crore.
On a question of whether the government would prefer to dilute equity through multiple tranches, Pandey said, “The number of tranches will depend on us because it is a very complicated issue of when once can go for a new FPO because the size is very large, the number of shares is also very large, and it is depending upon that we have to decide how much we will be able to come out (in the first tranche).”
After the first tranche, the government will have to wait for a year before bringing another tranche to the markets, he added.
Pandey further stated that a portion of the issue will be reserved for anchor investors, in a similar way that has been done for IRFC and RailTel, adding that the process will begin after the DRHP is filed. A portion for employees is also likely.
Actuarial firm Milliman Advisors LLP India has worked out the embedded value of LIC, while Deloitte and SBI Caps have been appointed as pre-IPO transaction advisors. The government has appointed 10 merchant bankers, including Goldman Sachs (India) Securities Pvt Ltd, Citigroup Global Markets India Pvt Ltd and Nomura Financial Advisory and Securities (India) Pvt Ltd, to manage the mega IPO of the country's largest insurer.