The much awaited draft red herring prospectus (DRHP) for initial public issue by Life Insurance Corporation of India (LIC) is out. LIC filed the DRHP on Sunday evening, which showed the company is diluting 5% stake through the IPO. As per the DRHP, equity shares outstanding prior to and after the offer stands at 632,49,97,701. Government is divesting 31,62,49,885 shares in the insurance giant, translating into 5% dilution of government stake. Retail quota is fixed at 35% of the issue size, translating into approximately 11.06 crore shares for retail investors.

The striking part of the LIC issue is the policyholder quota, where LIC's existing policyholders will get allocation. The quota for policyholders is set at 10%, but discount for them has not been announced yet. The record date for policyholders is mentioned as February 13, which means all LIC policyholders before or on February 13 are eligible for the issue.

Sources inform Fortune India that over 75 lakh policyholders have updated their PAN in the last six months. Earlier, the company had announced that policyholders who want to subscribe to the LIC issue need to update their PAN. It is expected that at least 80% of the policyholders with updated PAN would subscribe the issue, making LIC the biggest IPO in terms of retail application.

Since there is no mention about the amount that company is seeking to raise, Fortune India did a back of the envelope calculation based on sources close to the LIC IPO process. It is believed that the government is looking to raise around ₹70,000 crore from the IPO. As 35% of the issue size is fixed for retail, the company is seeking around ₹24,000 crore from retail participation.

Is it too ambitious? Well, it seems possible as the number of retail participants is growing and every month over a million new demat accounts are getting opened. Currently, the Indian share market has over 8 crore demat account holders. If LIC prices its issue at an attractive rate then raising the required capital from the retail population seems plausible, says a person who closely works with the company’s IPO process.

Glenmark Life Sciences IPO that saw 39 lakh applications emerged as the largest IPO in terms of retail application in the last 10 years. The all time record currently stands with Reliance Power that witnessed 45 lakh applications. Market participants believe that LIC will easily surpass Reliance Power's record.

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