Insurance behemoth Life Insurance Corporation of India (LIC) on Sunday filed draft papers with capital market regulator SEBI for the mega initial public offer (IPO), aiming to mobilise an estimated Rs 63,000 crore. 

The IPO, which is likely to hit the capital market in March, is entirely an Offer for Sale (OFS), through which the government would dilute 5 per cent of its stake by selling 31.63 crore shares. According to merchant banking sources, the government is expecting to garner up to Rs 63,000 crore (about $8 billion) from the IPO. 

According to the Draft Red Herring Prospectus (DRHP), a portion of the IPO will be reserved for subscription for eligible employees and policyholders. The employees’ reservation portion will not exceed 5 per cent, while it would not be more than 10 per cent of the offer size for policyholders. LIC’s share capital was raised from Rs 100 crore to Rs 6,325 crore in September last year to help facilitate the IPO. LIC’s listing is crucial for the government to meet the lowered revenue estimates of Rs 78,000 crore for the current financial year. 

The government had an initial target of Rs 1.75 lakh crore from the disinvestment proceeds. Till now, the Centre has raised around Rs 12,000 crore from the privatisation of Air India and stake sale in other PSUs. 

The government owns a 100 per cent stake (or 632,49,97,701 shares) in LIC. Once listed, it is likely to become the country’s biggest company by market capitalisation. “The DRHP of LIC IPO has been filed today with the SEBI. For filing valuation, about 31.6 crore shares are on offer, representing 5 per cent equity,” Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey tweeted on Sunday. 

According to the draft prospectus, LIC’s embedded value has been pegged at about Rs 5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors. Under the embedded value method, insurance companies’ present value of future profit is also included in its present net asset value (NAV). “The objects of the offer are to achieve the benefits of listing the equity shares on the stock exchanges and carry out the OFS of up to 31,62,49,885 equity shares by the selling shareholder,” the DHRP said. 

The entire proceeds of the IPO would go to government, and LIC will not receive any, it said. The Cabinet Committee on Economic Affairs had in July last year cleared the proposal for LIC’s IPO. “Our corporation does not contemplate any issuance or placement of equity shares from the date of this DRHP until the listing of the equity shares,” it said. 

Last month, LIC had reported a profit after tax of Rs 1,437 crore for the first half of the financial year 2021-22 as compared with Rs 6.14 crore in the year-ago period. Its new business premium growth rate stood at 554.1 per cent in the first half of 2021-22 compared with 394.76 per cent during the year-ago period. 

LIC has been providing life insurance in India for more than 65 years and is the largest life insurer in India, with a 64.1 per cent market share in terms of premium, a 66.2 per cent market share in terms of new business premium and a 74.6 per cent market share in terms of number of individual policies issued. 

There are currently 24 life insurance companies in India, with LIC being the sole public player. The size of the Indian life insurance industry was Rs 6,20,000 crore on a total premium basis in FY21, up from Rs 5,70,000 crore in FY20. 

As many as 10 merchant bankers, including Kotak Mahindra Capital, Goldman Sachs (India) Securities, Citigroup Global Markets and Nomura Financial Advisory and Securities India, are managing the public issue.