LIC to File DRHP for Mega IPO in December

The much talked about LIC IPO may finally see the first step in the first week of December when it files the draft red herring prospectus (DRHP) with SEBI. The LIC IPO has already gone through basic processes like the statutory amendments to the Life Insurance Corporation Act, appointment of merchant bankers, appointment of legal advisors and registrars.

By first week of December, LIC is expected to file the DRHP with the actuarial valuation.

Towards the last week of November, the merchant banker are expected to start talking to the anchor investors to gauge market demand. LIC has already appointed a total of 10 merchant bankers comprising of 5 global investment banks and 5 major Indian investment banks.

LIC will be the largest Indian issue by a margin depending on how much the government eventually plans to sell to the public.

Check - LIC IPO Government Approval

Originally, the DIPAM was to offer 10% to the public but a subsequent amendment allowed the DIPAM to offer even 5% if justified. It is yet to be finalized whether the government will offer 5% or 10% but the final issue size would be based on that.

The final issue size is expected to be in the range of Rs.60,000 crore to Rs.100,000 crore depending on how much the government eventually decides to divest in the IPO.

The embedded valuation based on actuarial value is being done by Milliman Advisors. This actuarial value will form the basis of the embedded valuation of LIC and the pricing would eventually depend on that. The actuarial valuation is expected to be readied by the first week of December post which the DRHP will be filed.

The government of India is keen to push through the IPO before March this year since that would enable the divestment proceeds to be included in the current fiscal year. The government has set an aggressive divestment target of Rs.175,000 crore for this year and that would only be possible if the mega LIC IPO goes through.

There are also other big divestments like that of BPCL that are also pending and are unlikely to happen in this fiscal.

Irrespective of whether the government eventually sells 5% or 10%, this will be the largest IPO in Indian stock market history, much larger than Paytm IPO of Rs.18,300 crore that just closed last week.

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