Govt may slash LIC IPO size on market volatility. All you want to know

Indian insurance behemoth Life Insurance Corp (LIC) may have just become the latest casualty of the Russia-Ukraine war. If news reports are anything to go by, the Indian government is likely to cut LIC’s IPO size by as much as 40%. 

The government was earlier reportedly looking to divest 7% of the insurer’s shares for Rs 50,000 crore. But the IPO size may now be cut to Rs 21,000 crore with a greenshoe option of up to Rs 9,000 crore owing to market volatility in the wake of the war, according to reports in Business Standard and Bloomberg. The insurer is now likely to be valued at Rs 6 lakh crore at a 5% stake dilution, the reports said.

Citing unnamed government officials, the reports say that the government wants to complete the listing, which will still be India’s biggest ever, within the next two weeks. 

Why has the LIC IPO been delayed?

The IPO was to happen by the end of March, to help the government meet its disinvestment target for the financial year, but got delayed owing to the Russian invasion of Ukraine in late February, as stock markets across the world, including in India, were rattled.

Which is India’s biggest IPO to date?

Paytm’s parent company One 97 Communications, which had raised Rs 18,300 crore in November last year, remains the biggest IPO till date, in the country’s history. 

Why is the LIC IPO so important to the government?

The IPO is important because it gets the government much needed cash and helps it meet its lofty disinvestment target. 

How much money have companies in India raised via IPOs in 2022? How does it compare with the money raised last year?

Indian companies have so far raised $1.1 billion via IPOs this year, according to data compiled by Bloomberg. Last year, during the same period, the figure was $3 billion. 

When is the LIC IPO likely to hit the market?

If news reports are to be believed, it could hit the market by May 2. 

How do LIC’s numbers look ahead of the listing?

LIC's first-year premium collection, rose 7.9% to Rs. 1.98 trillion for the year ended 31 March, according to a report in the Mint newspaper.

Mint said that India’s largest insurer ended last fiscal year with a market share of 63.25%, lower than the previous year. However, in March, the company’s premium collections grew 51% to Rs. 42,319.22 crore from a year earlier, garnering a market share of 71%, the data showed.