LIC IPO gets once step closer to becoming reality

It looks like the government is setting out on the LIC IPO on a war footing. The Department of Investments and Public Assets Management (DIPAM) has sent out request for proposals for bankers, registrars and legal advisors to the issue. The IPO is proposed to hit the market around January 2022. There appears to be a small change in the IPO structure. Originally, it was supposed to be just an offer for sale by the government. However, now it is proposed to be a combination of new issue and an offer for sale.

The IPO rules were earlier amended too allow companies with indicative market capitalization of over Rs.100,000 crore to sell just 5% of their shares through the IPO. The legal amendments needed in the Life Insurance Corporation Act have already been proposed and passed as part of the Finance Bill in both the Houses of Parliament. Hence, the complex task of approvals for change in ownership, change in investment pattern and a new dividend distribution policy are already in place. Under the new IPO rules, the company can divest just 5% if market cap is more than Rs.100,000 crore subject to 10%  divestment within 2 years and 25% dilution in 5 years. This would mean a series of capital raising by LIC.

Also Read: LIC IPO Government Approval

While the final details are awaited, the LIC IPO is expected to be to the tune of around Rs.70,000 crore. That would be substantial progress for the government towards its coveted Rs.175,000 crore disinvestment target for the fiscal year 2021-22. It will also create a listed corporate behemoth that would be larger than Reliance in terms of market cap when it lists.