LIC to Publish IPO Details in Fourth Week of Jan-22

Finally, there appears to be a high degree of optimism on the LIC IPO happening in the current fiscal year itself. According to latest reports, ministry officials have confirmed that the LIC IPO would be filed in the last week of January and all the relevant details including the price band and issue size will be announced at that time.

While the final numbers are yet to come in, the size of the divestment by the government is expected to be around Rs.90,000 crore. How much the government sells will depend on the valuation arrived at, which in turn will depend on the embedded actuarial valuation arrived at by the US based Milliman Advisors. 

As per early estimates, the embedded actuarial valuation is expected at around Rs.4 trillion so the overall valuation of LIC could be in the range of around Rs.15 trillion, applying the global benchmark of 3.5 to 4 times embedded value as market valuation. That means the government will have to dilute about 6% of its equity in LIC to raise Rs.90,000 crore.

LIC manages total assets under management (AUM) of over $450 billion, which is approximately equal to what the entire mutual fund industry in India manages. The above LIC valuation will peg it as the second most valuable company in India after Reliance Industries. LIC will also become the second most valuable insurance company in the world after United Health of the US.

Officials have confirmed that the embedded valuations are likely to be available by the end of January and by that time the pricing model will also be done. This will make the LIC all set to file the prospectus with SEBI. The entire IPO process could be fast tracked considering that this is going to be a high profile IPO. In fact, LIC has substantially expanded his team to accommodate the additional work pressure coming from the LIC IPO.

LIC has nearly 68-70% of the life insurance market share and it would prefer a lot more clarity on how it can leverage its massive network of 10 lakh agents and over 25 crore policy holders to enhance their IPO demand franchise. The government has already appointed 10 investment banks to handle the issue comprising 5 global names and 5 domestic names.

The road shows are also likely to start around the last week of January to gauge demand from global institutions, although most of them are likely to be done over video call only due to the current pandemic situation.

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