LIC to File for IPO in Third Week of January 2022

The much awaited LIC IPO process may finally commence in the third week of January 2022 with the DRHP filing. While there is no official confirmation yet, it has been reported that this is very likely based on indications coming from the top officials of LIC.

The embedded value of LIC is estimated to be around $150  billion, which will make LIC the third largest Indian company in terms of market capitalization after Reliance Industries and TCS. Of course, it is still not clear whether the government will offer 5% or 10% in the IPO.

Normally, the IPO is done at a premium to the embedded value, so depending on final decision of the government on the stake sale, the overall IPO size of LIC may range from around Rs.70,000 crore to as high as Rs.100,000 crore.

Once the DRHP filing is done in the third week of Jan-21, the SEBI approval process normally takes between 2 to 3 months. It is not clear whether the approval will be fast-tracked or whether the government plans to schedule the IPO for the June quarter. However, considering the complexity and size, June quarter looks more likely.

There are two very important facets that will determine the success of the LIC IPO, apart from the institutional support. Of course, an issue of this size will surely require strong support from QIBs, but there will be two additional equations to consider.

LIC has over 30 crore policies spread across nearly 25 crore customers. The process to link the LIC policies with PAN card has started and this offers a huge captive retail and corporate market for LIC to tap. Also, there are nearly 12 lakh LIC agents who and push IPO sales.

The tremendous response to mega IPOs like Zomato and Nykaa and their strong post-listing performance shows that there is appetite for big-ticket IPOs. The only challenge is for LIC to get as much traction as possible from its captive market of policy holders and agents.

As of now, they are still in the realm of expectations and we have to await the filing of the draft red herring prospectus first. The road shows and broker meets will give a clearer picture of the appetite for the IPO. That should still be some time away.

The LIC IPO also has larger implications for the IPO market per se. A host of other IPO candidates are waiting in the side lines to finalize their issue dates, ensuring it does not clash with the LIC IPO to prevent crowding out of investors. It will be a huge experiment for LIC, the government and also for IPO markets overall.

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