Winning Bizness Desk

Mother of all IPOs to be open for retail investors from May 4 to 9

Mumbai. Life Insurance Corporation (LIC) has fixed the price band for its initial public offer (IPO) at Rs 902-949 a share. The issue, which will remain open for retail investors from May 4 to 9, will enable the government to offload 3.5% stake in the insurer for Rs 21,000 crore, according to an official source. The insurer filed the red herring prospectus (RHP) with the Securities and Exchange Board of India (Sebi) late Tuesday.

Country’s largest IPO

The IPO will still be the country’s largest though the issue size is lower than the 5% mentioned by the insurer in the draft IPO papers filed with the regulator on February 13. The valuation is also almost half the level indicated by the Centre in the FY22 Budget.

35% set aside for retail investors

The net of the two categories — policyholders and employees, 35% is set aside for retail investors, while 50% is kept for qualified institutional buyers (QIBs) and 15% for non-institutional investors. As much as 60% of QIBs portion is reserved for anchor investors. According to the sources, the minimum bid size for the IPO will be 15 shares.

Russia-Ukraine war impacted the size

The reduced size of the IPO from 5% in the draft offer document, and the lower valuation are prompted by feedback from institutional investors, and recent capital outflows from the Indian and other emerging-economy markets following the Russia-Ukraine war. The valuation of the insurance behemoth is set at 1.1 times its embedded value of Rs 5.4 trillion arrived at by Milliman Advisors.

Govt took bold step

Despite FPIs pulling out money from Indian and other emerging markets due to lower risk appetite, the government has decided to go ahead with the LIC IPO, as it did not want to disappoint domestic retail investors, who it feels have been eagerly waiting for the issue. By going in for only 3.5% stake sale in the IPO, the government hopes to capitalise on gains in valuation in a year or so, when it will likely come out with a follow-on offer.