The much-awaited initial public offering (IPO) of state-run insurer Life Insurance Corporation (LIC) is finally going to open for subscription on May 4, 2022. The government aims to sell a 3.5% stake, lower than the earlier offer of 5%, comprising 22.13 crore (221,374,920) shares of ₹10 face value.

The government will raise around ₹20,557 crore through the IPO, the price band for which has been fixed at ₹902-949 per share. Investors can subscribe to the LIC IPO in a lot of 15 equity shares.

The complete details about the LIC issue will be revealed today as the company will hold a press meeting on the public issue today. Initially, the government had envisaged raising between ₹65,000 crore to ₹70,000 crore by diluting 5% equity.

In a big cheer for retail investors and employees, they can buy shares at ₹45 discount, while policyholders will get ₹60 discount on each share.

The anchor tranche will open on May 2, while the issue will be open for public subscription from May 4 till May 9. In terms of reservation, 10% of the issue size or 2.21 shares will be allotted for policyholders, while 0.15 crore shares have been kept for employees.

After policyholders and shareholder reservations, the remaining lot will be allocated in the ratio of 50% for qualified institutional buyers (QIBs), 35% for retail investors and 15% for non-institutional investors (NIIs). A total of 60% of QIB shares have been reserved for anchor investors.

A total of 22,137,492 shares will be allocated for LIC policyholders, while 1,581,249 shares will be allocated for LIC employees.

LIC's post-issue market cap will be ₹5,87,342.85. This is close to market giants like Reliance Industries or Tata Consultancy Services (TCS). The valuation is 1.1 times LIC’s embedded value of ₹5.4 lakh crore.

The finalisation of share allotment will happen on May 12, while refunds will be initiated on May 13. The credit of equity shares will be done on May 16, while trading in the LIC shares will start on May 17.

The company will be listed on both the BSE and NSE. After the public issue, the promoter (the government) will hold a 96.5% equity stake in the company, while 3.5% will be held by the public.

Axis Capital, Kotak Mahindra Capital, BofA Securities, Citigroup Global, Goldman Sachs, ICICI Securities, JM Financial, J.P.Morgan, Nomura Financial, and SBI Capital Markets are the book running lead managers of the issue.

Notably, there is no provision for diluting less than 5% of the equity in the Securities Contract Regulation Rules currently. The insurance giant would also need to dilute 10% and 25% equity in two and five years of listing, respectively, the rules suggest.

LIC had earlier filed the first DRHP with markets regulator Securities and Exchange Board of India (SEBI) on February 13, followed by a corrigendum on February 16 to include financial results for the December quarter. The markets watchdog had given its approval to the draft IPO papers on March 8, making it one of the fastest DRHPs to be processed.

State-run LIC is the largest life insurer in India, with a 61.6% market share in terms of premiums and a 61.4% market share in terms of new business premiums. The company commands a 71.8% market share in terms of the number of individual policies issued.

Even with the reduced issue size of over ₹20,557 crore, LIC will be the largest IPO in the country, outdoing Coal India’s ₹15,500 crore IPO in 2010 and Reliance Power’s ₹11,700 crore IPO in 2008.

It is the largest asset manager in India as of December 31, 2021, with assets under management worth ₹40.1 lakh crore, on a standalone basis, which is 1.1 times the entire Indian mutual fund industry’s AUM. Its product portfolio covers various segments including savings insurance, term insurance, health insurance, annuity and pension products and unit-linked insurance products.

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