BackLIC IPO: Govt files updated draft papers with Q3 financials
In February, the government filed the draft red herring prospectus (DRHP) for LIC IPO with the regulator giving details of financial results till September
PremiumThe government has filed updated draft papers with market regulator Sebi for an initial share sale of Life Insurance Corp, which included the December quarter financials of the insurance behemoth, news agency PTI reported citing an official.
In February, the government filed the draft red herring prospectus (DRHP) with the regulator giving details of financial results till September. Sebi has cleared the DRHP recently.
LIC IPO has been put off to anywhere between mid-April to May amid volatile markets in the wake of Russia-Ukraine conflict.
The government has time till May 12 to launch the initial public offering (IPO) of LIC without filing fresh papers with market regulator Sebi. Recently, disinvestment secretary Tuhin Kanta Pandey said that there is strong investor interest for the state-run company's offer, but Centre will proceed with the IPO only when it is confident of successful listing.
He said the filing of the DRHP was well within the anticipated timeline, but the current volatile market scenario is a result of unanticipated global events emerging out of the geopolitical tensions which the government is closely monitoring.
The government will sell about 31.6 crore shares or 5% stake in insurance behemoth, which is estimated to fetch around ₹60,000 crore to the exchequer. The public issue was originally planned to be launched in March, but the Russia-Ukraine crisis has derailed the plans.
LIC's embedded value, which is a measure of the consolidated shareholders value in an insurance company, was pegged at about ₹5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors. Although the DRHP does not disclose the market valuation of LIC, as per industry standards it would about 3 times the embedded value.
At 5% stake sale, the LIC IPO would be biggest ever in the history of Indian stock market and once listed LIC's market valuation would be comparable to top companies like RIL and TCS. So far, the amount mobilised from IPO of Paytm in 2021 was the largest ever at ₹18,300 crore, followed by Coal India (2010) at nearly ₹15,500 crore and Reliance Power (2008) at ₹11,700 crore.
Ahead of the IPO, LIC has released its financial results for the December quarter (Q3FY22). According to the website, the insurer's net profit rose to ₹235 crore in the third quarter as against a meagre ₹94 lakh in the same period last year. Similarly, net profit for the nine months period ended December surged to ₹1,643 crore from ₹7 crore a year ago.
The sharp jump in LIC profit is largely due to the change in the surplus distribution model. The LIC Act has been amended to bring its surplus distribution model at par with private life insurers.
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