The government is likely to take a call on the initial public offer of LIC later this week amidst continued volatility in the stock market. Finance ministry officials said the mega public issue could be delayed if the markets remained volatile.

Sources said the government has asked the issue merchant bankers to tap potential anchor investors including sovereign wealth funds.

The pre-IPO placement to the anchor investors will be the benchmark for the pricing of the issue. The merchant bankers include Goldman Sachs, Citigroup Global Markets, BofA Securities and JP Morgan.

The officials said FIIs need to invest significantly in the IPO as otherwise the issue will suck up domestic liquidity, adversely impacting yields. Officials said there could be some clarity on cutting down the valuation of LIC by about 30 per cent to make it attractive to investors and increasing the quantum of stake sale to 7 per cent from 5 per cent.

The government plans to dilute 5 per cent stake in the insurance behemoth through the sale of 31.6 crore shares and collect Rs 63,000 crore. It would help to meet the Centre’s curtailed disinvestment target of Rs 78,000 crore for the current fiscal.

A portion of the IPO would be reserved for anchor investors and up to 10 percent for policyholders. The government has time till May 12 to launch the IPO without filing fresh papers with the markets regulator.

The public offering was initially expected to be completed by the end of March. But the sudden turmoil in the markets on account of the war in Ukraine forced the government to shelve the issue.

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

Although the issue documents do not disclose the market valuation, as per industry standards it would be about 3 times the embedded value.