LIC Plans to File DRHP in January’s Last Week while India Tweaks Rules for It

According to reports, Life Insurance Corporation (LIC) is planning to file its IPO papers with the market regulator during January’s last week. This news comes at a time when the government authorities are trying their best to make this public issue a grand success.

The following sections contain more details on this topic. Keep reading!

LIC Aims to File Draft Papers

The government-run insurance provider may file IPO draft papers in the week starting 31 January 2022. Upon this action, individuals will know the total value of this IPO and the number of shares offered.

However, government officials and LIC’s representatives denied commenting on this topic.

The planned DRHP filing would help the government embark on launching LIC into the primary market by March end. This will help in providing a boost in revenue to the firm.

Further, the Prime Minister’s government seeks to sell a 5 – 10% stake in LIC, generating a whopping amount of Rs. 10 trillion.

As per officials, the government is still waiting for the completed valuation transcripts. After receiving this report, the projected valuation for LIC IPO may even change. They also added that LIC might reach a valuation of 5x higher than its predicted embedded value, which is 3x-4x more than most life insurers.

Meanwhile, the government is sparing no effort to make this IPO succeed.

But how? Read below.

India Tweaks Rules for LIC IPO Success

Government executives and authorities are modifying capital market rules, publishing advertisements, and sending SMS to ensure that LIC IPO becomes a success.

PM Narendra Modi’s government considers LIC’s public issue key to inclusion in its economic agenda. The proceeds from this state-owned insurer will be crucial in reaching a budget-deficit goal.

However, as per experts, LIC’s IPO size is enormous. So, it may be easy for the government to tweak regulatory amendments. But, it will require major marketing efforts to exceed the Rs. 500 million bar.

Consequently, authorities will revise Foreign Direct Investment (FDI) rules to gain foreign investors’ attention. As of now, equity stakes are permitted for foreign investors in most insurance providing firms. However, LIC is an exception here because of an act of Parliament.

To gather attention from the public, LIC is sending phone messages to policyholders. Moreover, it had also published a newspaper ad with the subject, ‘It’s best in life to be prepared’. The insurer also asked some of its policyholders to update their personal details, which will help them to participate in this IPO.

Bottom Line

LIC’s plan to file its draft papers is a piece of great news for investors eyeing this public issue. Further, the government’s initiative for giving clearance to foreign stakes will permit global funds participation. In addition, it will let them buy more after LIC’s listing. Regulators and authorities have made a few other changes since last month, including reinforcing rules regarding the sale of shares by anchor investors.

Source – Bloomberg Quint, Economic Times

Frequently Asked Questions

1. When will LIC launch its IPO?

The opening date of the LIC IPO is unknown yet. However, as per sources, it is expected to hit the primary market between January and March 2022.

2. What is the requirement for policyholders to apply for this IPO?

Policyholders will have to link their PAN with LIC policy in order to be eligible for LIC’s public issue.

3. What is LIC’s market share?

According to the firms’ 2019-2020 report, it features around 69% market share in the insurance space.

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.