The much-awaited initial public offer of Life Insurance Corporation (LIC) of India is likely to be the largest share sale on Dalal Street. Government which has been seen liquidity drying out in the capital market due to the coronavirus lockdown may conduct the IPO of the public sector insurer in tranches selling 25% stake, according to reports. Currently it owns 100% stake in LIC.
Earlier, 10% stake sale was planned in the insurer but the government is seen falling short of its divestment target of Rs 2.10 lakh crore this fiscal.
The huge revenue shortfall is expected due to the stalled economic activity in coronavirus lockdown which dented market sentiment. Hence, it is likely to sell 15% additional stake in the insurer which will help in meeting the stake sale target. Listing of the insurer will make it one of India's biggest companies in terms of market capitalisation along with Reliance Industries, TCS and HDFC Bank.
In last fiscal, the government lowered its disinvestment target to Rs 65,000 crore from the budget estimate of Rs 1.05 lakh crore. The IPO, which may value the insurance behemoth between Rs 8 lakh crore to Rs 10 lakh crore, is likely to fetch the government over Rs 1 lakh crore.
This places it above the largest IPO in India till date- Coal India. The government raised Rs 15,200 crore from the share sale held in October 2010. Coal India IPO received bids 15.2 times the targeted amount. The firm saw bids worth Rs 2.36 lakh crore from October 18 to October 21, 2010. Retail investors received a 5% discount on their bids.
In the LIC IPO too, retail investors are expected to get bonus and IPO discount. The government is likely to list the state-run insurer in the last quarter of current fiscal. In the 2020-21 budget, Finance Minister Nirmala Sitharaman had announced the government's plan to sell a part of its stake in LIC by way of IPO.
The government is expected to hire Deloitte Touche Tohmatsu India and SBI Capital Markets for the LIC's IPO. LIC is yet to file the draft red herring prospectus (DRHP) as of September 8 2020.. The government will soon invite bid seeking firms to value LIC.