Teji Mandi Explains: Government may soon launch LIC IPO

As per the media reports, LIC will be launching its IPO earlier than anticipated.

Teji MandiUpdated:Tuesday, April 19, 2022, 04:20 PM IST
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It's coming up soon! As per the media reports, LIC will be launching its IPO earlier than anticipated. The market’s appetite is growing, and the government doesn’t want to wait anymore.

What’s Happening?

The LIC IPO has got new modifications in the latest details. First, the government has amended the Foreign Exchange Management Act (FEMA) rules, paving the way for up to 20% foreign direct investment in the insurance behemoth LIC. Since the foreign inflows’ ceiling for public sector banks is 20% as per the present FDI policy, it has been decided to allow foreign investment of up to 20% in LIC and other such corporate bodies. This move has been taken to attract foreign investors.

Second, the LIC IPO’s valuation has been reduced by 30% to about Rs 11 lakh crore from Rs 16 lakh crore earlier to make it look more attractive. The government is factoring in the interest of LIC policyholders who have opened Demat accounts to buy LIC IPO. The LIC board will file a revised public offer document according to the media. It will file the revised documents with India's Insurance Regulatory and Development Authority (IRDAI) after the board approves its FY22 results.

Third, the government officials have suggested mid or end-April dates to the top ministers’ panel for the IPO. The panel is likely to make its decision soon.

Should Investors Be Worried?

The revised documents and postponement of the IPO are for obvious reasons. The government is not aiming for a failed LIC IPO, and therefore, it’s taking all of these efforts. With no IPOs in sight for a few months, the market is mainly looking out for this one. After LIC gets listed, its valuations would be comparable to top companies like Reliance Industries Limited and Tata Consultancy Services.

What Lies Ahead?

Until and unless the government makes an announcement, the listing dates cannot be confirmed. Also, modifications are happening to the IPO, so it’s better to wait and get maximum benefits out of the IPO.

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