India’s largest and government-owned insurance company Life Insurance Corporation of India (LIC) is rolling out its IPO soon. Notably, in LIC’s IPO, a chunk of the shares will be reserved for its policyholders. According to a few reports, it is estimated that 10 per cent of the shares will be reserved for its policyholders in IPO. Another advantage to policyholders will be that shares can be issued at a discount price to policyholders. In this article, we will talk about this in detail.
LIC will apply this week:
The government is planning to sell 5% of its shares in the company. The government plans to offer 316 million shares of the 6.32 billion shares it owns in Life Insurance Corp. Most probably, LIC will announce its IPO in March. The company is looking to file its Draft Red Herring Prospectus (DRHP) this week. It will apply to SEBI for approval to bring the IPO. The board will meet on Friday to ratify its decision.
How much government will raise?
In a recent interview, the DIPAM secretary told that the embedded value of the company is estimated to be about INR 5.4 trillion. However, DRHP will disclose the stake of the government which it will sell in LIC through IPO. According to an estimate, the government may sell a 5-7 per cent stake in the IPO to raise Rs 65,000-75,000 crore from the issue.
Benefits to Policyholders:
Ministry of Finance said earlier that 10% of issued shares will be reserved for the policyholders. Above that, policyholders may get an additional 5% discount at the issue price.
LIC has said that to participate in the IPO, policyholders must ensure that their PAN details are updated in the company’s records. Applying for an IPO in India is possible only if you have a valid Demat account. Being a policyholder, if you too want to apply for LIC IPO, then you must have a Demat account and your PAN details should be updated with LIC. Besides, your PAN must be linked with your Aadhar.
Apart from policyholders, LIC employees can also be given some concession in the price band in its IPO.