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Rs 15 Lakh Cr Valuation, New Rules, Key Details

LIC IPO: The Life Insurance Corporation of India is likely to file the draft papers of its multi lakh crore initial public offering (IPO) by the last week this month, according to reports. Touted as India’s biggest public offering till date, the insurer will file its draft papers with the authorities during the week starting January 31. The LIC IPO is said to fetch Rs 15 lakh crore though its initial offer sale. The draft prospectus, which is to be filed soon, is likely to shed light on the size of the IPO, say reports. The deliberations regarding the details of the LIC IPO are private as of now.

According to a report by Bloomberg, the state-run insurer will also specify the number of shares going up for sale in its draft prospectus. As per the report, India is keen on pushing for a value of about Rs 15 lakh crore for the LIC IPO, while a completed valuation is still to be set. The embedded value of the LIC is likely to be more than Rs 4 lakh crore, while the market value of the company might be four times of that. Once all this is settled, the final value of the IPO would be in, which is subject to change depending on these factors.

“If investors agree with those calculations proposed by the government, LIC would join the league of India’s biggest companies – Reliance Industries Ltd and Tata Consultancy Services Ltd – that enjoy a market capitalisation of Rs 17 lakh crore rupees and Rs 14.3 lakh crore, respectively,” reported Bloomberg quoting a source.

In this regard, the government has ramped up efforts to make the LIC IPO a success. From adjusting capital-markets rules to sending phone messages and publishing newspaper advertisements, the authorities are putting in every possible effort. Said a separate Bloomberg report, “Prime Minister Narendra Modi’s government has the IPO — which could raise between 400 billion rupees ($5.4 billion) and 1 trillion rupees this quarter — as a key item in its economic agenda, with proceeds from the state-run insurer essential to reaching a budget-deficit target.”

According to an official who Bloomberg quoted, authorities will tweak and review rules on foreign-direct investment in order to grab interest of foreign investors and make the process easier. Equity stakes among foreigners are allowed for most Indian insurers, but not in LIC, which is a special entity created by an act of Parliament, said the report.

The LIC has been publishing advertisements and luring domestic policyholders to make the upcoming IPO a success. “It’s best in life to be prepared,” said a newspaper advertisement of the LIC last month. The company has also urged policyholders to link their PAN with their LIC in order to invest in the insurer’s shares.

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