LIC IPO: In a major development in the run-up to the listing of the life insurance behemoth, the government has amended the rules of the Foreign Exchange Management Act (FEMA). The move has paved the way for up to 20 per cent foreign direct investment (FDI) in LIC. The FEMA notification is required to operationalise the already approved and revised Foreign Direct Investment (FDI) policy to facilitate overseas investment in the mega initial public offer (IPO).
The LIC IPO would be the biggest ever in the history of the Indian stock market. As per the current DRHP, the government will dilute a 5 per cent stake in the insurance behemoth through 31.6 crore shares to garner Rs 63,000 crore. Once listed LIC’s market valuation would be comparable to top companies like RIL and TCS. So far, the amount mobilised from the IPO of Paytm in 2021 was the largest ever at Rs 18,300 crore, followed by Coal India (2010) at nearly Rs 15,500 crore and Reliance Power (2008) at Rs 11,700 crore. Here are the key developments investors should know about.
LIC IPO: Updated DRHP
According to sources, the country’s largest insurer is likely to file an updated draft red herring prospectus (UDRHP) for the LIC IPO after consultations between the Department of Investment and Public Asset Management (DIPAM) and investment bankers and a key meeting of the LIC board.
LIC IPO: Reduced Valuation
The LIC board is likely to decide on reducing the valuation of the company and offering more shares in its initial public offer that will make the float more attractive to many of its policyholders who are first-time investors. The government is now looking at a valuation of around Rs 11 lakh crore from the IPO against Rs 16 lakh crore earlier.
LIC IPO: Listing Date
The government planned to launch LIC IPO by the financial year 2022. However, the war between Russia and Ukraine and the volatile situation in the stock market, derailed the timeline. On March 1, finance minister Nirmala Sitharaman said, “Ideally, I’d like to go ahead with it because we’d planned it for some time based purely on Indian considerations. But if global considerations warrant that I need to look at it, I wouldn’t mind looking at it again.” “When a private sector promoter takes this call, he has to only explain this to the company’s board. But I would have to explain it to the whole world,” she further added. Now, the government is likely to launch LIC IPO between April 25-29, the sources have said.
LIC IPO: Centre Wooing Sovereign, Pension Funds
The government has reached out to Abu Dhabi Investment Authority, Singapore-based GIC, three Canadian pension funds and Qatar Investment Authority among other sovereign wealth funds and pension funds on being anchor investors in Life Insurance Corporation (LIC) of India’s initial public offer (IPO).