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NEW DELHI : The government aims to raise about 75,000 crore by selling a 5% stake in Life Insurance Corp. of India (LIC) through India’s largest-ever initial public offering, in what is expected to test investor appetite amid a volatile market.

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).

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Based on the 5.39 trillion embedded value worked out by actuarial firm Milliman Advisors, the government is seeking a valuation of at least 15 trillion for LIC, said an investment banker, who is part of the syndicate advising the government on the share sale. However, the actual money raised will depend on investor appetite.

“Private insurers are trading at 2.5-3.5 times their embedded value," the investment banker said, seeking anonymity. “However, the government is seeking three-to-five times LIC’s embedded value," the person added.

At three times the embedded value, the IPO offer size is expected to be about 75,000 crore. At this level, the listing is set to break records of the total funds raised by an Indian company by a wide margin. The sale proceeds will also help the government surpass the revised annual asset sales target of 78,000 crore for the year ending 31 March.

LIC is also the largest fund manager in India as of 30 September, with 39.56 trillion of assets under management (AUM ) on a standalone basis. That is more than 3.3 times the AUM of all private life insurers in India and 1.1 times the entire Indian mutual fund industry. Its investments in stocks represented around 4% of the total market capitalization of NSE as of 30 September.

The LIC IPO documents also claimed it is ranked fifth globally in terms of life insurance gross written premium and 10th worldwide in terms of total assets.

For FY19, FY20, FY21 and the six months ended 30 September, LIC had a market share of 66.4%, 66.2%, 64.1% and 63.6%, respectively, in terms of total premium in the life insurance sector, indicating a slight decline over the years.

Mint reported last week that the government would sell at least 5% equity through the IPO, with some shares reserved for staff and policyholders.

“The IPO is 100% OFS by the government and no fresh issue of shares by LIC," said department of investment and public asset management secretary Tuhin Kanta Pandey on a Twitter post on Sunday evening. Pandey said previously that the government aims to bring the largest-ever IPO to the market within this financial year.

The documents specify the portion reserved for staff shall not exceed 5% of post-offer equity share capital and may be offered at a discount. Further, it said the policyholder reservation portion will not exceed 10% of the size and may also be offered at a discount. About 60% of qualified institutional bidders portion may be allocated to anchor investors on a discretionary basis. “Subject to valid bids being received at or above the offer price, under-subscription, if any, in the non-institutional portion or the retail portion, would be allowed to be met with spillover from any other category or combination of categories of bidders at the discretion of our corporation and the selling shareholder in consultation with the book running lead managers and the designated stock exchange," the prospectus stated.

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