The board has approved a minimum stake dilution of 3.5% via Ipo, and could raise the limit to 5% depending on market conditions.
The Board of Directors of the Life Insurance Corporation (LIC) of India has learned that it has agreed to dilute the 3.5% stake in the country’s largest insurer, even keeping the 5% stake dilution as an ascending limit, as filed in a draft red herring prospectus.
A senior official with knowledge of the development, the board of directors at a meeting on Saturday, decided to reduce the stake for dilution, which will be subject to regulatory approvals, amid headwinds from volatile stock markets and investor interest, even as it diluted up to 5% of the stake as mentioned in the prospectus.
The 5% limit is still on the table. On demand at the moment, the markets can support about 3.5%, but if it changes, we can easily increase it to 5%,” said the official, who asked not to be named because the measures are not in the public domain.
The government seeks to bring together R21000- R30,000 crore from sale at appraisal RThe official added $6 trillion.
While the IPO is expected to hit the market in the first week of May, reservations, discounts and the issue price will be verified by Wednesday morning. It did not respond to inquiries directed to the Ministry of Finance until late Saturday evening.
Thus, the largest IPO ever to be floated on the Indian stock markets will take place well before its May 12 deadline, after which it will have to recast the DRHP with its March quarter results.
Tuhin Kanta Pandey, Secretary of Investment and Public Asset Management (Dipam), said last month at the Mint India Investment Summit 2022 that there was strong investor interest in the state-run company’s bid, but that the center would only go ahead with its IPO when it was confident of listing Insurance company successfully.
The success of the LIC IPO is critical for the government to achieve its asset sales target, which has been pared back to a modest level. RTarget Rs 65,000 crore for current fiscal, below average R78,000 crore for the previous financial year. The government could meet less than 17% of its revised FY22 asset sales target as the Russian invasion of Ukraine, and the ensuing volatility in stock markets forced it to postpone the sale of LIC shares until this fiscal year.
However, delaying the IPO beyond May 12 means delaying the IPO by two to three months.
Mint reported earlier this week that the nation’s largest insurer performed stellar with the first-year premium pool, a key metric, rising 7.9% to R$1.98 trillion for the year ended March 31, with a market share of 63.25%, down from the previous year. However, in March, the company’s premium collections grew by 51% to RRs 42,319.22 crore over the previous year, and a market share of 71%. LIC sold 21.7 million insurance policies in the year ended March 31, up 3.54% from the previous fiscal year, boosting its market share to 74.6% in terms of policies sold.
Mint reported last week that the massive IPO has attracted significant interest from at least 12 large foreign and domestic fund managers. At least five of India’s largest asset managers, at least three large foreign sovereign funds, two global pension fund managers and two global hedge funds have committed to investing. RThe report said Rs 18,000 crore to the bankers managing the initial public offering of LIC. Mint also reported that local mutual funds are likely to invest R7,000 to 8,000 crore as core investors.