NEW DELHI: The government is likely to dilute 3.5% stake instead of 5% as planned earlier in Life Insurance Corporation(LIC) through its listing, according to the government sources. It is hoping to garner Rs 21,000 crore from this much-awaited initial public offering (IPO), likely to hit the floor in May first week. “We are planning to sell 3.5% instead of 5% in LIC. The issue size would be of Rs 21,000 crore,” a source, privy to the matter told TNIE.
Currently, the Government of India holds 100% stake in LIC. Its valuation would be Rs 6 lakh crore with 3.5 dilution, 1.1 times of its embedded value of Rs 5.4 lakh crore. Embedded value is a measure of the consolidated shareholders value in an insurance company.
“LIC IPO is likely to come to the market in May first week. Its board met today to approve the issue size of Rs 6 trillion with 3.5 dilution. Reservations, discounts, issue dates and issue price will be known by Wednesday morning,” the source added.
Explaining why the government has decided to sell a smaller portion of the equity in the insurance behemoth, one of the sources said, “We can’t take a risk of selling a larger share to the public as it would suck liquidity from the market. Situation is already very volatile in view of Russia-Ukraine crisis and resurgence of Covid cases in many parts of the country.”
Notably, the government will have to file the fresh documents with the markets regulator the securities exchange board of India (SEBI), in case it fails to roll out the IPO before May 12. The Finance Ministry had previously planned to launch the IPO of LIC by March this year but it had to postpone the roll-out on account of tensions between Russia and Ukraine.