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NEW DELHI : The forthcoming initial public offering (IPO) of state-run Life Insurance Corporation (LIC) may come with a discount for its millions of policyholders as the government is all set to file the draft red herring prospectus (DRHP) or offer document this week, said department of investment and public asset management (Dipam) secretary Tuhin Kanta Pandey.

“Under the retail window, certain reservation is there. We also have a policyholders’ window. We have made provisions under the LIC Act that up to 10% of the issue can be offered to policyholders at some discount on the competitive basis. There will be reservation for employees also," he said.

Some concession may also be expected for retail investors and employees, two people close to transaction advisors for the IPO said requesting anonymity, but declined to give details. Pandey, however, confirmed the possibility of a discount to LIC policyholders only and did not comment on other categories of investors.

Discounts could be offered to small investors as the government intends to encourage participate of the common man in the proposed IPO of LIC, said one of the persons mentioned above. The advisors expect the size of the issue to be between 5% and 10%.

Pandey said the DRHP would reveal what percent of the government’s stake will be diluted in LIC through the IPO. “A minimum 5% is certainly expected," he said.

The reduction in expected disinvestment proceeds in the revised estimates (RE) stage of 2021-22 has nothing to do with the IPO size and valuation of LIC as the government’s disinvestment receipts in the current financial year may even cross the RE figure, he said.

The budget presented on 1 February trimmed the disinvestment target from the original budget estimate (BE) of 1.75 trillion to 78,000 crore in 2021-22. The disinvestment target (in BE of 2022-23) is also conservative at 65,000 crore.

Estimates of disinvestment targets and actual receipts could differ because of various reasons and it should not be correlated with the size of LIC’s IPO, Pandey said.

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