The government is mulling the launch of Life Insurance Corporation’s initial public offer in early May if the current volatile phase in the market subsides by then.
Sources said the government could divest more than the proposed 5 per cent stake in the state-owned insurer if the road shows reveal a surge in investor interest in the country’s largest-ever IPO.
The government has time till May 12 to launch the IPO without filing fresh documents with markets regulator Sebi. Officials said the department in charge of disinvestment was closely monitoring the bourses as the financial markets have been whiplashed by the see-saw nature of news flow from the raging Russia-Ukraine conflict.
If the government misses the May 12 date, LIC would have to start the entire process afresh and file new documents before the Securities and Exchange Board of India (Sebi) for its approval.
A delayed IPO of LIC will add to the growing list of offerings being put on hold as the war dampens investor appetite for risky assets. On February 13, the insurer had filed the draft red herring prospectus (DRHP) for the IPO with Sebi.
The government plans to sell about 31.6 crore shares or 5 per cent stake in LIC, estimated to fetch around Rs 60,000 crore to the exchequer. The IPO is billed the biggest ever in the history of the Indian stock market and once listed, LIC’s market valuation would be comparable with RIL and TCS.
The biggest IPO so far was the Paytm float in 2021 which mopped up Rs 18,300 crore. Coal India had raised Rs 15,500 crore in 2010 and Reliance Power, Rs 11,700 crore in 2008.
LIC’s embedded value, which is a measure of the consolidated shareholders value in an insurance company, was put at about Rs 5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors.
Embedded value is the present value of future profits plus net asset value (NAV) of its holdings. Although the DRHP does not disclose the market valuation of LIC, as per industry standards it would be about 3 times the embedded value.
LIC’s net profit rose to Rs 235 crore in the third quarter against a meagre Rs 94 lakh in the same period last year. Net profit for the nine months period ended December surged to Rs 1,643 crore from Rs 7 crore a year ago.
The sharp jump in profit is largely due to a change in the surplus distribution model. The LIC Act has been amended to bring its surplus distribution model on a par with private life insurers.
