LIC IPO: The government is preparing to reduce the IPO size of LIC to Rs 21,000 crore, so that the IPO can be made successful easily.
LIC IPO: The size of the Initial Public Offer (IPO) of the country’s largest insurance company LIC (Life Insurance Corporation) can be reduced by up to 40 percent. Sources familiar with the matter said that the government was earlier preparing to raise Rs 60,000 crore from LIC’s IPO.
However, now it is preparing to launch its IPO of only Rs 21,000 crore. Apart from this, a greenshoe option of Rs 9,000 crore will also be launched, which can take the total size of the IPO to Rs 30,000 crore. It has also been learned that LIC’s IPO can be launched on 2 May 2022.
What is Green Shoe Option?
Green shoe option is an option for additional allotment of shares. If the company’s IPO gets more subscription than its size, then it can allot additional shares through green shoe option. This allows the company to modify its IPO size as per the market demand and situation.
For example, if the proposed offer size of LIC is fixed at Rs 21,000 crore and it receives bids of Rs 28,000 crore from investors, it can retain the subscription by allotting an additional 7,000 crore shares under the green shoe option. Let us tell you that LIC is preparing to have a green shoe option of Rs 9,000 crore.
LIC IPO date
English newspaper Business Standard, quoting LIC sources, has reported that LIC’s IPO can be launched on May 2. The government had submitted the draft paper for LIC’s IPO in February.
The government has time till May 12 to bring the IPO of LIC. If it is not able to bring the IPO by this date, then it will have to submit the papers for approval of the IPO again with SEBI.
Along with this, he will also have to update LIC’s December quarter results and the new embedded value of the company. According to the draft paper, the embedded value of LIC is currently stated to be Rs 5.39 lakh crore.
LIC’s valuation also reduced
According to the report, the government has also reduced the valuation of LIC to Rs 6 lakh crore. This is just 1.1 times its embedded value (Rs 5.39 lakh crore). In the draft papers submitted by the government for the IPO in February, the valuation of LIC was put at around Rs 12 lakh crore.
However, now the government is preparing to raise up to Rs 30,000 crore by selling about 5 per cent stake at a valuation of Rs 6 lakh crore. An investment banker said, “Significant reduction in valuation of LIC will facilitate the success of its IPO.
The government wants investors investing in the IPO to get benefits on the listing and be interested in buying its shares even after listing.”
Why is the size of the IPO being reduced?
Due to the daily changing situation in the war between Russia and Ukraine, volatility is being seen in the stock market right now. Apart from this, increasing interest rates by the US Federal Reserve Bank,
tightening of monetary policy and selling by foreign investors have also increased volatility in the market. Many experts said that given the current volatility in the market, the government may find it difficult to raise Rs 60,000 crore.
Will still be the country’s biggest IPO
Even if the government reduces the IPO size of LIC to Rs 21,000 crore, it will still be the largest IPO in the country. Till now, the record of bringing the country’s largest IPO is in the name of Paytm, which brought an IPO of Rs 18,300 crore last year.
