LIC Now Plans to offer 3.5% Equity in may IPO

The government will offer 3.5 % equity in the initial public offer (IPO) of Life Insurance Corp of India (LIC) that’ s likely to hit the market in the first week of May, officials told ET. The LIC board met on Saturday to approve the proposed 3.5% equity dilution, they said. “This however would be subject to regulatory approvals,” said one of them, adding that reservations for select categories, discounts, issue date and pricing will be finalized by Wednesday. The company is likely to be valued at 6 lakh crore and a 3.5% dilution will mean an offer size of 21000 crores. However, with markets turning choppy, there is a sense that a bigger issue would be difficult to sell. ET in its Saturday edition, reported that the government would approach the securities and exchange Board of India (Sebi) to seek permission for a smaller issue size. Sebi’s public offer rules mandate that if the post-issue capital of a company calculated at the offer price is above 1 lakh crore, it’s required to issue shares worth 5000 crores and 5% of equity. The LIC offer will be the first one to hit the market often the rule for large offers was put in place last year. The government will need an exemption from the rule for offering less than the threshold level. The Draft Red Herring Prospectus had proposed a 5% equity dilution. The government has decided to move forward with the listing but with a reduced size in view of market volatility after discussions with all stake holders. Officials said the listing of the state-owned insurer is important to broaden people’s participation and to ensure that the expectation of domestic investors on the proposed offer are met. Moreover, it was felt that any further delay in the IPO could push it back indefinitely, as volatility could persist, with the US federal Reserve raising interest rates and geopolitical tensions escalating. LIC’s IPO was initially planned for march but was postponed because of market volatility after Russia invaded Ukraine at the end of February.

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