LIC expected to announce IPO details in this week

Even as the speculations are rife about the likely date of the LIC IPO, the first indications are coming in that the LIC IPO may open for anchor investors either in the end of April or in the first week of May. It may be recollected that the LIC IPO has to be completed by 12th May to be able to use the current SEBI approval.

In case, the deadline of 12th May is crossed, then LIC will have to seek fresh actuarial valuation for its business and then file a fresh draft red herring prospectus (DRHP) with SEBI. That could delay thing substantially. 

While there is no clarity still on the exact timing of the IPO, unofficial sources indicate that the issue announcement would be made by the current weekend itself.

In the original prospectus, LIC had envisaged selling 31.2 crore shares or 5% of the total government holding LIC for an approximate consideration of Rs.65,000 crore. However, the LIC IPO could not happen last fiscal due to the pressures created by the Russia-Ukraine war.

Now, when the IPO details are announced over this weekend, there are two possibilities. One possibility is that the government may raise its stake selling from 5% to 7% and do the IPO at a lower valuations so as to still reach the monetary divestment target.

The other option is that due to the changed macroeconomic conditions and elevated geopolitical risks, LIC may just sell 5%, but may settle for a lower valuation and a lower IPO amount. We would know the details only when the IPO specifics are announced over this weekend.

Last year, the government had fallen woefully short of its divestment target. It had originally targeted Rs.175,000 crore from divestments, which was later toned down to Rs.78,000 crore. However, with the LIC IPO not happening last year, the government finally succeeded only in getting about one-fifth of the revised disinvestment target.

For FY23, the government has targeted a more conservative Rs.65,000 crore. However, if LIC and BPCL go through in this year, then the government would do a lot better than the divestment target.

LIC was always slated to be largest Indian IPO in Indian history. After all, the largest Indian IPO till date, Paytm ,had raised Rs.18,300 crore. Even a toned down LIC IPO would still be more than 3 times as large as the Paytm IPO.

The LIC IPO will be lead managed by SBI Caps, Citigroup, Nomura, JPMorgan, Goldman Sachs, along with five other domestic and international investment banks. They will also act as the book running lead managers.

When the dates are announced, the DIPAM will have to keep few thing in mind. LIC will be the third largest insurance IPO in the world and it is coming a time when FPIs are selling and the Fed is hawkish. Secondly, while LIC’s top line has been impressive, the same cannot be said about the bottom line.

That will remain an overhang. For now, we need to await the final date announcement for the LIC IPO over the weekend.