Life Insurance Corporation, the state-owned insurance behemoth, has filed IPO papers with the Securities and Exchange Board of India (SEBI) on Sunday.
Secretary, Dipam has confirmed the development through a tweet:
The insurer is looking to sell the Centre's five percent equity stake in the company via its upcoming IPO, the DRHP document showed.
The portion reserved for policyholders can go up to maximum of 10 percent. “The aggregate of reservations for eligible policyholder(s) shall not exceed 10 percent of the offer size,” the DRHP stated.
The Centre aims to offload a total of 316 million equity shares to investors through the public offering of the 6.32 billion outstanding shares, the document showed.
The Centre wishes to conclude the IPO by the end of FY22 ending March 2022.
The current fiscal FY22's divestment target was revised to Rs 78,000 crore from the Budget estimates of Rs 1.75 lakh crore and the Centre would like to cash in the LIC IPO to meet its revised divestment estimate.
The IPO drive will have a 50 percent reservation for Qualified Institutional Buyers (QIB), not 15 percent for Non-Institutional Investors (NII), and 35 percent reserved for retail investors.
Policy-holders along with employees of LIC will also have a quota reserved in the IPO, the document showed.
LIC to become country's biggest firm by market cap
The government owns a 100 percent stake in LIC. Once listed, it is likely to become the country's biggest company by market capitalisation.
Actuarial firm Milliman Advisors LLP India has worked out the embedded value of LIC, which is upwards of Rs 5 lakh crore.
The listing of LIC is poised to be India's biggest IPO till date.
The embedded value of LIC, as on September 2021, was Rs 5.4 trillion, DIPAM said in a Twitter post.
As per the draft red herring prospectus, LIC's embedded value has been pegged at about Rs 5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors.
Under the embedded value method, insurance companies' present value of future profit is also included in its present net asset value (NAV).
'LIC has 66 percent market share in new business premiums with 283 million policies and 1.35 million agents as of March 31, 2021,'' Pandey added.
The government, however, did not disclose in the DRHP the market valuation of LIC or the discount which will be given to policyholders or LIC employees in the public offering.
The IPO of LIC is expected by March and the proceeds would be crucial to meet the revised disinvestment target of Rs 78,000 crore for the current fiscal. So far, the government has raised Rs 12,030 crore through CPSE disinvestment and Air India strategic sale this fiscal.
The government had an initial target of Rs 1.75 lakh crore from the disinvestment proceeds.
Till now, the Centre has raised around Rs 12,000 crore from the privatisation of Air India and stake sale in other PSUs.
The government has appointed 10 merchant bankers, including Kotak Mahindra Capital, Goldman Sachs (India) Securities Pvt Ltd, Citigroup Global Markets India Pvt Ltd and Nomura Financial Advisory and Securities (India) Pvt Ltd, to manage the mega IPO of the country's largest insurer.
Meanwhile, the government has significantly increased the authorised capital of LIC to Rs 25,000 crore from Rs 100 crore, to facilitate the listing.
The government is also mulling allowing foreign investors to pick up stake in LIC. As per Sebi rules, foreign portfolio investors (FPI) are permitted to buy shares in a public offer.
FDI policy would have to be tweaked for FII/FPI investment in this IPO, as LIC is a corporation and not an insurance company. The Cabinet Committee on Economic Affairs had in July last year cleared the proposal for LIC's IPO.
LIC H1FY22 results
Last month, LIC reported a profit after tax of Rs 1,437 crore for the first half of the financial year 2021-22 as compared with Rs 6.14 crore in the year-ago period.
Its new business premium growth rate stood at 554.1 percent in the first half of 2021-22, compared with 394.76 percent during the year-ago period.
The overall total net premiums increased Rs 1,679 crore to Rs 1.86 lakh crore during April-September 2021, from Rs 1.84 lakh crore in the year-ago period.
LIC's share capital has been increased to Rs 6,325 crore in H1 FY22 on the eve of its IPO.
LIC market share unparalled
According to a report by rating agency Crisil, LIC is not only the world's largest when it comes to home-market share with over 64.1 percent of the total gross written premium as of 2020 but also the one that offers the highest return on equity at 82 percent, apart from being the third-largest in terms of life insurance premium.
At 64.1 percent or with a gross written premium (GWP) of $56.405 billion, LIC's market share is unparalleled globally, with no other life insurer anywhere else enjoying such a high market share, the report said.
Market share elsewhere, the Chinese market is dominated by Ping An Insurance and China Life Insurance, with 21 percent (GWP at $74.13 billion) and 20 percent ($69.65 billion). The largest Japanese player Nippon Life's market share is only 16.2 percent ($39.84 billion).
However, nowhere else in the world is the market share gap between the largest and the second-largest as stark as here, with the second-largest player SBI Life having only eight per cent market share compared with LIC's 64.1 percent during fiscal 2021, it said.
(With inputs from Agencies)
