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Insurance behemoth Life Insurance Corporation of India (LIC) is coming up with India's largest initial public offering (IPO) as it has filed the draft papers with market regulator SEBI. Government, the current 100% owner of LIC, has proposed to divest 5% of LIC’s equity through the offer for sale (OFS).

According to the draft IPO documents filed with the Securities and Exchange Board of India (Sebi), the government will sell 316.25 million shares through an offer for sale (OFS). 

“Generally, the appetite for LIC IPO will be high from common & new investors given its mammoth public brand value. However, in the long-term, the end demand and performance will depend on its future growth, profitability, and sustenance of market share in the life insurance industry. While in the short-term, the valuation demanded by the government and discount provided to retail investors will define the success & performance of the offer," said Vinod Nair, Head of Research at Geojit Financial Services.

LIC's embedded value stood at 5.4 trillion for September 2021 which is up from 956 billion in March 2021.

The insurance giant has highest new premiums and widest agent network although it has ceded market share to private players over years. It is the biggest asset manager amongst life insurers with around 40 trillion in assets under management (AUM).

"We can presume a high demand or vice versa depending on the valuation demanded by the government on LIC’s Embedded Value is at discount or premium to the insurance industry average," Nair added.

Analysts at Jefferies believe that LIC’s listing will broaden investible universe and further raise sector’s relevance in investor’s portfolio. "It will also help investors to better track sector dynamics as LIC disclosures become frequent. LIC has recalibrated its par and non par products ahead of the listing," they said in a note.

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