The IPO of the country’s largest insurance company Life Insurance Corporation of India (LIC) will come by the end of December. Even if it is delayed, it can be brought in early January. This is happening after the warning of Finance Minister Nirmala Sitharaman. For this, LIC has accelerated the process of bringing IPO.
By Any Means Plan to Bring IPO by December
According to sources, the government wants to bring LIC’s IPO by any means by December. Necessary instructions have been given to LIC for this. This is the reason why LIC has started expediting this matter. In its first phase, 10 merchant bankers were finalized last week. It has both domestic and foreign merchant bankers.
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Merchant Bankers Appointment First Process
Actually, the first process of bringing any IPO is the appointment of merchant bankers. IPO cannot come without merchant bankers. It is the merchant bankers who tell the company’s valuation, IPO price, investor sentiment, etc. All this is decided only after telling them.
10 Merchant Bankers Appointed
LIC is gearing up to overcome the IPO by any means. That is why it has appointed 10 merchant bankers. Major merchant bankers of LIC include Goldman, Citigroup, Nomura, SBI Capital, JM Financial, Axis Capital, Bank of America, JP Morgan, ICICI Securities and Kotak Mahindra Capital.
DRHP May File in October
According to sources, LIC is likely to file a draft red herring prospectus (DRHP) with SEBI in the first week of October in this regard. The government is also opening the way for foreign investors in LIC. It is reported that the government may give 20% stake to foreign investors. For this, changes will be made in the LIC Act.
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Biggest IPO in the Country
This IPO will be the biggest IPO ever in the country. Through this, the government can raise 80 to 90 thousand crore rupees. The government has set a target of raising Rs 1.75 lakh crore in this current financial year, in which LIC will be a major contributor. LIC has 32 crore policies. There are 12 lakh agents. There are 1.14 lakh employees. Its total assets are Rs 34 lakh crore. LIC has subsidiaries in Singapore, Bahrain, Kenya, Lanka, Nepal, Saudi Arabia and Bangladesh. By selling its 10% stake, the government can get 1 to 1.15 lakh crore rupees.
Shareholders May Get Surplus
On the other hand, before the IPO of LIC, the government can change the rules to distribute the surplus money to the shareholders. The Finance Department and the Public Asset Management Agency (DIPAM) are working on this. At present LIC switches 5% of its surplus to shareholders’ fund. The remaining 95% is deposited directly into the policyholder’s fund. Surplus will be assessed after all liabilities.
What Can be the Price Band
At what price the shares will be brought in LIC IPO, it is not decided yet. But, it is very important from the market point of view. Actually, the experience of IPO of government insurance companies before getting listed in the market has not been good. In the year 2017, the share of New India Assurance Company was offered for Rs 770-800. It was listed on BSE for Rs 748.90. Today the share price of New India Insurance is around Rs 161 much below the listing price. General Insurance Corporation of India was listed on NSE at Rs 857.50, but today its price has reached Rs 149.50.
