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LIC IPO News: Government reduced the target of LIC IPO, now intends to sell 3.5% shares for 21,000 crores, huge cut in valuation too

Earlier there was a proposal to sell 5% shares through LIC IPO, the new valuation of the company is Rs 6 lakh crore, the issue may come in the first week of May

Government Cuts LIC IPO Size : The size and valuation of the IPO of the country’s largest insurance company Life Insurance Corporation (LIC) is expected to be cut. The government has now made up its mind to sell 3.5 percent shares of the company through IPO for Rs 21,000 crore. This IPO is expected to be brought in the first week of May. According to news agency PTI, LIC will file a red herring prospectus with SEBI by Wednesday, in which details like price band of the stock, policyholders, reservation for employees and discounts can be given. The new proposal has been approved in the company’s board meeting on Saturday. There is also news that it has been decided to sell 3.5 percent shares of LIC under IPO, but if investors show more enthusiasm at the time of issue, then it can be increased to 5 percent in case of over-subscription.

Earlier, in the month of February, the Government of India had planned to sell 5 percent shares under the IPO of LIC. But now due to the volatility in the market due to Russia’s attack on Ukraine, there is talk of cutting the size of the IPO. Selling 3.5 percent shares of LIC for Rs 21 thousand crore would mean that the valuation of this hundred percent state-owned company is being estimated at Rs 6 lakh crore. At the beginning of LIC’s decision to bring IPO, this valuation was being estimated to be around Rs 16 lakh crore. According to this, a huge cut of about Rs 10 lakh crore is being made in the valuation of the company. It is being said that this deduction has been done on the basis of the feedback received from big investors in the changed market conditions.

An LIC official told PTI that the IPO could be brought in the first week of May if SEBI’s nod. Earlier in February, LIC had filed draft papers with SEBI, in which the government had expressed its intention to sell 31.6 crore or 5 per cent shares. International firm Milliman Advisors had estimated the embedded value of LIC at Rs 5.4 lakh crore as on 30 September 2021. The current valuation of Rs 6 lakh crore is about 10 per cent higher than this, whereas earlier it was being said that the valuation of a company like LIC should be at least 3 times the embedded value. On this basis, then the valuation of LIC was being extracted up to Rs 16 lakh crore. LIC’s IPO is going to contribute a lot to the current disinvestment target of Rs 65,000 crore of the Government of India. In the last financial year, the government had disinvested Rs 13,531 crore. (Input: PTI)

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