LIC initial offer may open on May 4 : Sources say the corporation is likely to file a revised prospectus this week

LIC had filed the draft red herring prospectus (DRHP) on February 13,: File Photo

TT Bureau   |   Mumbai   |    26.04.22  : The much awaited initial public offering of Life Insurance Corporation is likely to open on May 4.

The IPO, as per reports, is likely to close for subscription on May 9 and the portion meant for anchor investors would open on May 2. This could not be officially confirmed at the time of going to the press.

Informed sources, however, told The Telegraph that the corporation is likely to file a revised prospectus on Tuesday or Wednesday. The government is looking to sell a 3.5 per cent stake in the country’s largest life insurer against the original plan of offloading 5 per cent.

Despite the pruned size, the LIC IPO will be India’s largest. This record is now held by One97 Communications, Paytm’s parent, which last year raised Rs 18,300 crore from its IPO.

LIC had filed the draft red herring prospectus (DRHP) on February 13, wherein the Centre was offering 31.6 crore shares, or 5 per cent of the insurer’s equity, through an offer for sale.

The subsequent invasion of Ukraine by Russia and the volatility in the bourses affected this plan as there were doubts on whether the markets will be able to absorb such a huge issue.

The government was then looking to raise at least Rs 50,000 crore and was expecting a valuation of Rs 15 lakh crore for LIC. Reports now say that the issue will mobilise Rs 21,000 crore.

The float will help the Narendra Modi-government to meet the modest divestment target of Rs 65,000 crore  against Rs 78,000 crore in the previous fiscal.

Actuarial firm Milliman Advisors LLP India had worked out the embedded value (EV) of LIC, a key metric that is used to determine the valuation of insurance companies.

LIC’s embedded value as on September 30, 2021 stood at Rs 5,39,686 crore. Embedded value is the sum of present value of all future profits from existing business (or policies) and its net worth (assets minus liabilities).

LIC had 66 per cent market share in new business premium — the sum of first year premium and single premium from new business — with 28.3 crore policies and nearly 14 lakh agents as of March 31, 2021.

For the six-month period ended September 30, 2021, it earned a consolidated premium of Rs 1,87,535.3 crore compared with Rs 4,05,850.8 crore in the period ended March 31, 2021. Of this, Rs 1,86,097.2 crore (Rs 4,02,888.1 crore) came from India. The first year premium stood at Rs 13,399.7 crore against Rs 34,340.9 crore in March 2021.  It also got Rs 12,4473.3 crore as income from interest, dividends and rent against Rs 23,9565 crore in March 2021.

LIC is also the largest asset manager in India as on September 30, 2021, with an AUM (comprising policyholders’ investment, shareholders’ investment and assets held to cover linked liabilities) of Rs 39,558,92.9 crore on a standalone basis.