The highly anticipated initial public offering (IPO) of Life Insurance Corporation of India has finally been announced. The issue will open on May 4, and continue till May 9. The central government will offload 221,374,920 equity shares, representing 3.5% of the post-offer paid-up equity share capital, in this issue. Of this, 22,137,492 shares, or 10% of the issue, have been reserved for the eligible policyholders.

The insurance behemoth, in a bid to woo policyholders into becoming stakeholders in the company, is offering ₹60 discount on each equity share they bid on under the policyholder reservation portion. The price band for the issue has been pegged at ₹902 to ₹949.

Eligible policyholders, similar to other bidders, can place a minimum bid of 15 equity shares and then in multiples of 15 shares thereafter. The maximum bid amount under the policyholder reservation portion cannot exceed ₹2 lakh after factoring in ₹60 discount on each share.

Policyholders who have bought their policy on or before February 13, the day when LIC filed its draft red herring prospectus (DRHP), will be eligible for the policyholder discount. Group policyholders will not be eligible for bidding under the policyholder reservation portion either.

“Policyholders (excluding such other persons not eligible under applicable laws, rules, regulations and non-individual policy holders) of our corporation having one or more policies of our corporation as on the date of the DRHP and bid/offer opening date and are residents of India would be eligible to apply in this offer under the policyholder reservation portion,” the RHP for LIC IPO reads.

In case of joint policyholders, only one of the two will be eligible for the policyholder discount. Holders of lapsed policies can also bid under the policyholder reserved portion. All policies that have not exited the LIC record due to maturity, surrender or policyholder’s demise are eligible for the policyholder discount.

However, non-resident Indians (NRIs) holding LIC policies and other policyholders residing out of India are not eligible to bid for the 10% shares reserved for the policyholder discount.

Policyholders who bid under the retail category cannot benefit from the policyholder discount either. They can avail of the retail investor discount of ₹45 per share instead.

For policyholders to bid for the LIC IPO, they must have a demat account, which has been linked to their permanent account number (PAN) present in LIC records. Only the policyholders who had linked their demat accounts with their PAN by February 28 can bid under the policyholder reserved portion.

“A policyholder of our corporation was required to ensure that his/her PAN details are updated in the policy records of our corporation at the earliest. A policyholder who did not update his/her PAN details with our corporation before expiry of two weeks from the date of the filing of the draft red herring prospectus with SEBI (i.e., by February 28, 2022) shall not be considered as an eligible policyholder,” the LIC RHP reads.

LIC IPO details

The central government is looking to raise around ₹21,000 crore from the LIC IPO by diluting its 3.5% stake in the insurance major. The issue size has been revised from 5% considering the market conditions and lack of interest among investors towards IPOs.

Despite the revised issue size, the LIC IPO is set to be largest initial public issue ever seen in India, surpassing the likes of Paytm (₹18,000 crore) last year, Coal India (₹15,500 crore) in 2010, and Reliance Power (₹11,700 crore) in 2008.

The insurer is eyeing a valuation of close to ₹6 lakh crore on the upper band of the IPO price range through this issue.

LIC is planning to raise ₹2,100 crore from policyholders and ₹150 crore from employees reservation portions. A total of ₹3,751 crore will be raised from the net QIB portion, including mutual funds and other QIBs. The company will raise ₹2,813 crore from the non-institutional portion, and ₹6,565 crore from the retail portion.

The anchor portion of the IPO will open on May 2. The bidding for other categories will begin from May 4 and go on till May 9. The basis of allotment will be finalised with the designated stock exchange around May 12, followed by initiation of refunds around May 13. Equity shares will be credited into demat accounts of allottees by May 16. The shares will be listed on stock exchanges around May 17.

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