LIC Board Approves Cut In IPO Issue Size To 3.5% From 5%: Sources

LIC board accepted a reduce in its initial public offering (IPO) issue from 3.5% to 5%

The LIC board has accepted a reduce in its initial public offering issue size from 5 per cent to 3.5 per cent, sources have stated. The government will now dilute 3.5 per cent of its shares in LIC for Rs 21,000 crore, topic to approval of the capital markets regulator Securities and Exchange Board of India, or SEBI.

In the draft red herring prospectus, the government had proposed sale of its 5 per cent equity. This would worth LIC at Rs 6 trillion.

Earlier government estimates had known as for the insurer to be valued at around Rs 17 trillion.

The drastic reducing of ambitions for the IPO – which might still be India’s largest up to now – is seen as a setback for the government, which had positioned the sale as the primary and largest of a wave of privatisations aimed toward replenishing state coffers.

“Investors have become very risk averse in the last few months. After roadshows we realised there was no point in putting high valuation up front. Higher valuation can be discovered post the listing. After all, the government will still hold nearly 95 per cent of the issue,” news agency Reuters reported on Friday, quoting an unnamed source.

The LIC IPO is prone to be launched within the first week of May, investment banking sources advised Reuters.

The government had initially wished to listing LIC within the final monetary year that ended March 31 but needed to delay the sale after Russia’s invasion of Ukraine triggered a market rout.

The 66-year-old company dominates India’s insurance sector with greater than 280 million insurance policies. It was the fifth-biggest world insurer in terms of insurance premium assortment in 2020, the latest year for which statistics can be found.

Investors have been involved that LIC’s investment decisions, together with these in loss-making state companies, might be influenced by government demands.

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