iNDICA NEWS BUREAU-
The Life Insurance Corporation (LIC) of India, the country’s largest insurance company which is wholly owned by the government of India, filed a DRHP for its eagerly awaited initial public offer (IPO) with the Securities and Exchange Board of India (SEBI) Sunday.
The DRHP, or draft red herring prospectus, comprises the preliminary legal documents that all companies seeking public funding must file. The documents contain financial information, risk factors, an overview of the company’s current standing, and other details that are important for investors before deciding to put their money into the firm.
In this IPO, which is set to be India’s largest ever, the government will offer 316 million shares, or about 5% of its holding in the corporation, for sale.
The measure is in line with several divestment measures taken by the government to try and meet its divestment target of Rs1,75,000 crore (approximately US $23.333 billion) in the financial year 2021-22.
The IPO is likely to come on the market next month and the government hopes to raise up to Rs75,000 crore ($10 billion) from the offer for sale.
LIC has been estimated by the investment banks managing the IPO to have an embedded value of approximately Rs5,00,000 crore ($66.67 billion).
LIC is the largest insurer in India with a huge market share (74.6 percent in terms of number of individual policies issued as well as by number of individual agents, who comprise 55% of all individual agents in India as at Mar 31, 2021; according to the draft prospectus).
It is expected to easily surpass the previous record for largest IPO in India, a distinction held by One97 Communications Ltd, parent of PayTM. The size of that public offering was Rs18,300 crore ($2.44 billion). when it hit the market late last year.
At the global level, the IPO of Saudi Aramco remains the largest, having raised $25.6 billion in 2020 by selling 3 billion shares. This sits alongside giants like Meta Platforms Inc (earlier Facebook Inc), Alibaba, SoftBank, NTT Communications Network and Visa.
LIC will retain the distinction of being the first insurance provider to potentially reach such heights. Most of the other companies on this list are technology or communications companies.
However, the scale of the release aside, the IPO comes at a precarious moment economically, with several foreign investors pulling out of the Indian market, major central banks around the world raising or planning to raise interest rates in an attempt to curb inflation, and the lukewarm success of several of last year’s offerings, many of which are trading well below the offer price, including PayTM, which is currently trading at a discount of nearly 60 percent.
