LIC IPO discount, reservation for policyholders | Key points

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Finance Minister Nirmala Sitharaman has talked about the reservation and discount that policyholders of Life Insurance Corporation (LIC) may get for the upcoming initial public offering (IPO). However, the launch date of the IPO of the country’s largest insurer is yet to be announced by the government.

Referring to the pre-IPO valuation of LIC, FM Sitharaman on Monday said that the embedded value of the insurance behemoth was calculated in an “extremely scientific way” and disclosed in draft IPO papers filed with market regulator the Securities and Exchange Board of India (Sebi).

LIC IPO DISCOUNT

The eligible policy holders of LIC will have up to a 10 per cent reservation, and may get a discount on offer price, FM Sitharaman in Rajya Sabha.

Policyholders must link Permanent Account Number (PAN) details with LIC policies to become eligible to get a discount on the IPO offer price.

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LIC IPO DATE

The IPO was originally planned to be launched in March, but the Russia-Ukraine crisis has derailed the plans as stock markets are highly volatile.

The government has time till May 12 to launch the IPO without filing fresh papers with the Sebi.

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LIC IPO DETAILS

• The government is expecting to garner over Rs 60,000 crore by selling about 31.6 crore or 5 per cent stake in the life insurance firm to meet the curtailed disinvestment target of Rs 78,000 crore in the current fiscal.
• LIC’s embedded value, which is a measure of the consolidated shareholders’ value in an insurance company, was pegged at about Rs 5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors.
• Although the DRHP does not disclose the market valuation of LIC, as per industry standards it would be about 3 times the embedded value.
• At a 5 per cent stake dilution, the LIC IPO would be the biggest ever in the history of the Indian stock market and once listed its 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.