The government aims to raise about £7.5 billion by selling 5% stake in Life Insurance Corporation of India (LIC) through India’s largest-ever initial public offering, in what is expected to test investor appetite amid a volatile market. According to the draft IPO documents filed with the Securities and Exchange Board of India (Sebi), the government will sell 316.25 million shares through an offer for sale (OFS).
Earlier, the insurer had also said that it will reserve a portion of the IPO for its policyholders, employees and retail investors. In the Budget speech, finance minister Nirmala Sitharam had said the LIC IPO will be completed before end of the fiscal. In the run-up to filing of the prospectus, government sources said that it was looking at a market valuation of around £150 billion for LIC. To get that valuation the IPO will need to be priced at around Rs 2,370 per share while for a valuation of £160 billion the offer price should be around Rs 2,530.
Set up in 1956, for the government per-share cost of acquisition of LIC shares was 16 paise, the prospectus showed. The life insurer has an embedded value of £54 billion as of September 30, 2021, calculated by international actuarial firm Milliman Advisors. For insurers, the embedded value is one of the most relevant valuation parameters that takes into consideration the company’s present value of future profit and its free surplus, among others.
The government has appointed 10 merchant bankers for the IPO with Kotak Mahindra Capital leading the pack. Other merchant bankers include Goldman Sachs (India) Securities, Citigroup Global Markets India and Nomura Financial Advisory and Securities (India).
