Explained: What you must know about LIC IPO, the country's largest to date

By Team Newsable | First Published Feb 14, 2022, 12:21 PM IST

The government would sell 316.25 million shares through an offer for sale, according to rough IPO paperwork filed with the Securities and Exchange Board of India. The offer is likely to be cleared by SEBI within a few days, and the IPO process and listing are scheduled to be completed by March 2022.

India is planning a massive IPO of the country's largest insurer as part of a larger privatisation drive to replenish state coffers depleted by the coronavirus outbreak and fund new infrastructure. While the price has not yet been determined, economists anticipate that the Life Insurance Corporation of India's IPO would be India's largest to date, potentially earning the government more than $10 billion. Following the IPO, which is due in March, LIC would be one of India's largest publicly traded firms, alongside Reliance and TCS.

The government intends to collect around Rs 75,000 crores by selling a 5% share in Life Insurance Corporation of India in India's largest-ever initial public offering, which is anticipated to test investor appetite in a turbulent market. The government would sell 316.25 million shares through an offer for sale, according to rough IPO paperwork filed with the Securities and Exchange Board of India. The offer is likely to be cleared by SEBI within a few days, and the IPO process and listing are scheduled to be completed by March 2022.

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Even before the coronavirus outbreak, Asia's third-largest economy was experiencing a sustained slump. Efforts to restrict the virus's spread, such as strict lockdowns, resulted in a major fiscal deficit and forced millions into unemployment and poverty.

The LIC IPO will help the government generate much-needed funds through privatisations, which are falling behind schedule. The IPO is a full offer for sale, which means that all revenues will go to the government to assist it to meet its disinvestment aim. The government had estimated disinvestment earnings for this fiscal year at Rs 78,000 crore in the Union Budget, which was delivered earlier this month.

Even at a valuation of Rs 10.8 lakh crore, a 5% sale would yield the government Rs 54,000 crore. This is nearly three times the Rs 18,300 crore raised by One 97 Communications Ltd (the owner of Paytm) in its initial public offering last year.

LIC was created in 1956 and was synonymous with life insurance in post-independence India until private firms were allowed entry in 2000.The company holds a two-thirds share in the domestic life insurance market. It manages assets of 36.7 trillion rupees ($491 billion), which equates to nearly 16 per cent of India's gross domestic product. The firm is also believed to own a large collection of rare and valuable artwork that includes paintings by MF Hussain -- known as the Pablo Picasso of India -- although the value of these holdings has not been made public.

LIC was established in 1956 and was synonymous with life insurance in post-independence India until private enterprises were permitted to enter in 2000. In the domestic life insurance industry, the business controls two-thirds of the market. It handles assets of 36.7 trillion rupees ($491 billion), which corresponds to approximately 16% of India's GDP.

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