15 February , 2022 Fdiindia
Ten Percent of Issue Size to be Reserved for Policyholders, Embedded Value at Rs. 5.4 lakh crore: LIC IPO
Life Insurance Corporation of India (LIC) has allotted policyholder and employee quotas and offered them a discount on the issue price while filing the draft papers for its eagerly-awaited IPO.
As per the draft prospectus, a maximum of 10 percent of the portion can be reserved for policyholders. “The aggregate of reservations for eligible policyholder(s) shall not exceed 10 percent of the offer size,” it said.
LIC will be putting up 31.6 crore shares for the public with an embedded value of Rs. 5.4 lakh crore.
As per the embedded value method, the present net asset value (NAV) of an insurance company includes the present value of future profits as well.
The foreign direct investment (FDI) policy was modified for the LIC IPO as LIC is a corporation and not an insurance company. Also, its investment policy was governed by a separate LIC Act.
The employee quota is limited to 5 percent. The amount of discount will be specified closer to the bid opening date.
LIC’s IPO is 100 percent offer for sale by the Government of India and no new shares are being issued by LIC. The IPO is expected by March and would expedite the government’s aim to touch the disinvestment target of Rs. 78,000 crore for the current financial year.
Till now, the government has raised Rs. 12,030 through the sale of Air India and CPSE (Central Public Sector Enterprises) disinvestment.
To manage LIC’s IPO, the Center has selected 10 merchant bankers that include Citigroup Global Markets India Pvt. Ltd., Nomura Financial Advisory and Securities (India) Pvt. Ltd., Kotak Mahindra Capital and Goldman Sachs (India) Securities Pvt. Ltd.
The government is considering allowing foreign investors to buy a stake in India’s largest insurer. As per the current SEBI rules, foreign portfolio investors (FPI) can buy shares in a public offer.