The LIC board has agreed to reduce the size of the IPO issue from 5 percent to 3.5 percent, sources said. The government will now dilute 3.5 percent of its shares in LIC at Rs 21,000 crore, subject to approval by the Securities and Exchange Board of India or SEBI, the capital markets regulator.
In the draft prospectus of the red herring, the government had proposed to sell its 5 percent shares. This would value LIC at Rs 6 trillion.
Previous government estimates had called for a value of the insurer at around Rs 17 trillion.
The drastic cut in ambitions for the IPO – which would still be India’s largest to date – is seen as a setback for the government, which had positioned the sale as the first and largest of a wave of privatizations targeting replenishing the treasury.
“Investors have become very risk averse in recent months. After roadshows, we realized that there was no point in giving a high valuation up front. A higher valuation can be discovered after the listing. After all, the government will still own almost 95 percent of the shares the matter,” Reuters news agency reported Friday, citing an unnamed source.
LIC’s IPO is likely to launch in the first week of May, investment bank sources told Reuters.
The government initially wanted to list LIC in its latest financial year ending March 31, but had to postpone the sale after Russia’s invasion of Ukraine caused a market disruption.
The 66-year-old company dominates the Indian insurance industry with more than 280 million policies. It was the world’s fifth largest insurer in terms of insurance premium collection in 2020, the last year for which statistics are available.
Investors were concerned that LIC’s investment decisions, including those in loss-making state-owned companies, could be influenced by government demands.