One of the biggest and most awaiting IPOs of the Indian market seems right around the corner. LIC (Life Corporation of India) is a major financial institution controlled and owned by the Government of India. And as part of the government’s divestment plan for 2021, LIC is looking to sell 5% of its stake to the public. While the LIC IPO is on the table for a while, unfavorable market conditions are delaying it.
Though the government is yet to disclose the issue size and other details to the public. Here are some things that you as an investor might find useful.
Issue size and face value
While the issue size is still just speculation, LIC has confirmed to dilute 5% of the company. Out of the issue size, 10% are reserved as part of the ‘PolicyHolder Reservation Portion‘ (PRP) quota. And an additional 5% of the issue will be reserved for the employees of the company. Unless there are any more updates, the retail investors still have 85% to bid on.
Who is eligible for bidding?
For the active policyholders, the investments can be made via ASBA and UPI channels at a maximum of Rs 2 lakh worth of holdings. However, there are no limits or constraints applied to the retail buyers. Moreover, the NRI policyholders are not eligible under the PRP and can only apply as retail investors.
In case there are joint policyholders, applications can be submitted by only one applicant. And they must have a Demat account in their name. However, the spouse receiving annuities for the policyholder is not eligible under PRP.
What about the lock-in?
Something that stands out and is worth noting for the policyholders is the lock-in. For the policyholders, there is no lock-in period and so the equity shares can be sold immediately if the investors wish to. And as for the retail investors, standard rules apply.
What are the latest updates on the IPO?
The government announced the LIC IPO in the Union Budget of 2020 and followed up with draft herrings and other updates. However, due to the market uncertainty and high volatility, the conditions were not favorable. And so, the upcoming IPO was postponed as the government could not garner the target funds.
The draft papers and all updated financials for LIC are submitted with SEBI. As per the latest financials, the Lie Insurance Corporation reported a profit of over Rs 1600 crores for Apr-Dec 2021. According to the regulations, the last date to launch the IPO with existing drafts is May 12, 2022. If the government fails to initiate the IPO, a fresh issue application will be filled with SEBI.
Many big banks and investment institutions are involved in this IPO, from valuation to issue, book building, and retail selling. Also, some of the major Indian banks will support the issue and retail sale of the stocks. Considering the embedded value of LIC and 5% dilution, the LIC IPO will be the biggest issue in the Indian stock market.