The size of the initial public offering (IPO) of the Life Insurance Corporation of India (LICs) could be reduced to Rs 21,000 crore, experts said. However, the LIC IPO can come with a greenshoe option of Rs 9,000 crore. The total size of the IPO, after taking into account the greenshoe option, will amount to Rs 30,000 crore and will lead to a 5 percent dilution of the government stake.
A greenshoe option is an over-allotment option. The option gives the company the choice to keep excess subscription and helps it adapt the public issuance to demand and market conditions.
LIC IPO Size
The government submitted LIC’s draft documents to the Securities and Exchange Board of India (Sebi) in February and the aim was to raise about Rs 65,000 crore at a market value of Rs 12 lakh crore. Now the IPO size is likely to be reduced to Rs 21,000 crore with a greenshoe option of Rs 9,000 crore.
IPO date LIC
The LIC’s public offer is now expected to hit the market on May 2, according to the BS report citing sources. The government submitted new draft documents for the IPO last month. The government now has until May 12 to make the offer, after which the Center must file new papers with the Securities and Exchange Board of India. It will also have to provide the December quarter results and update the embedded value as well. The embedded value of LIC was at Rs 5.39 lakh crore as of September 31, 2022, according to draft documents.
Currently, market conditions are volatile due to ongoing sell-offs by foreign portfolio investors amid the US Federal Reserve’s decision to aggressively tighten its monetary policy and raise interest rates.
LIC IPO Reserved Quota
About half of the IPO problem has been solved for qualified institutional buyers (QIBs). Of the portion of the QIB, 60 percent is earmarked for anchor investors on a discretionary basis. One third of the anchor investor portion will be reserved for domestic mutual funds.
About 15 percent is reserved for non-institutional investors (NII). About 35 percent will be available for retail investors to participate. A significant portion, no more than 10 percent of the public issue, will also be reserved for policyholders. 5 percent of LIC’s IPO is also reserved for employees. Both employees and policyholders will have the opportunity to book LIC IPO at a discounted rate.
Biggest IPO to date
Even after the reduced size of Rs 21,000 crore, LIC’s IPO becomes the largest IPO ever in the country. As of now, Paytm’s IPO is the largest at Rs 18,300 crore in 2021, followed by Coal India Ltd at Rs 15,500 crore in 2010 and Reliance Power at Rs 11,700 crore in 2008.
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