The LIC Board of Directors has approved a reduction in the IPO issue size from 5% to 3.5 per cent.

According to sources, the LIC board has accepted a reduction in the issue size of its initial public offering from 5% to 3.50%. The government would now sell 3.5 per cent of its LIC shares for Rs 21,000 crore, pending approval from the capital markets regulator, the Securities and Exchange Board of India (SEBI).

The government suggested selling its 5% shares in the draught red herring prospectus. This would put the value of LIC at almost $6 trillion.

According to previous official estimates, the insurer is worth roughly $17 trillion. The government positioned the sale as the first and largest wave of privatisations to replenish state coffers. The drastic reduction in ambitions for the IPO – which would still be India’s most significant to date – is seen as a setback for the government, which had positioned the sale as the first and largest of a wave of privatisations aimed at replenishing state coffers.

“In recent months, investors have become extremely risk averse. We realised after roadshows that putting a high valuation upfront was pointless. Following the listing, a higher value can be discovered. After all, the government would continue to control about 95% of the issue, “According to Reuters, an unnamed source told the news agency.

According to investment banking sources, the LIC IPO would likely be launched in the first week of May.

The government had planned to float LIC during the previous fiscal year, which ended March 31, but had to postpone the sale after Russia’s invasion of Ukraine caused a market meltdown.

With over 280 million policies, the 66-year-old firm leads India’s insurance sector. In 2020, the most recent year for which figures are available, it was the fifth-largest worldwide insurer in terms of insurance premium collection.

Investors worry that government demands could influence LIC’s investment selections, notably those in loss-making state enterprises.

FOR FOUR REASONS, the LIC IPO is a gamechanger in the Indian equities market.

The listing of insurance behemoth Life Insurance Corporation (LIC) and stock exchanges is a watershed moment in India’s financial systems.

Indeed, LIC’s much-anticipated initial public offering (IPO) is approaching. Due to market instability induced by the Russia-Ukraine war. LIC’s listing on bourses as India’s most prominent and fifth-largest life insurance firm is expected to affect many things in the Indian capital market.

To begin with, when LIC shares start trading on stock exchanges, investor portfolios will change. This is because seasoned investors can’t afford to overlook the market leader in life insurance, which controls more than two-thirds of the industry.

Investors always exhibit a predisposition for the market leader in a sector when portfolio structures are established, even at the most basic level.

The underserved nature of our country’s life insurance industry is the second-factor driving investor interest in LIC. LIC writes millions of insurance policies, yet India’s insurance premium-to-GDP ratio is only 3.7 per cent, significantly below the global average of 7.23 per cent. Compared to people from other countries, most Indians have insufficient life insurance.

The fourth significant feature of LIC’s listing concerns the insurer’s portfolio disclosure. LIC is the largest investor in government bonds and equity assets, with assets of Rs 39 trillion, more than the whole mutual fund sector combined. Following its IPO, LIC, like any other publicly-traded company, will be required to publish quarterly financial reports. All market participants will be able to review the changes in LIC’s portfolio and take significant cues due to this.

LIC is the largest investor in government bonds and equity assets, with assets of Rs 39 trillion, more than the whole mutual fund sector combined. Following its IPO, LIC, like any other publicly-traded company, will be required to publish quarterly financial reports. All market participants will be able to review the changes in LIC’s portfolio and take significant cues due to this.

The LIC IPO has already sparked a frenzy in the market, and there hasn’t been a single day when the IPO hasn’t been covered in the press. The government’s offer to sell a 5% interest in LIC or 316 million shares will be India’s third-most valuable corporation.

The Securities and Exchange Board of India (SEBI) has received LIC’s draft red herring prospectus (DRHP), which provides detailed information on how Indian families are progressively investing in financial assets. Household savings in financial assets have increased to 41% from 31% between 2012 and 2020.

The LIC IPO will give India’s capital markets a much-needed boost. Following the insurer’s campaign encouraging existing policyholders to open Demat accounts has already resulted in new Demat account openings. LIC policyholders may be eligible for a discount on the IPO’s share price. The government is expected to sell 5-10% of its investment in LIC, depending on its worth.

A unique allocation of 10% of the issue amount is reserved for policyholders. There’s a risk that this (policyholders) group will obtain LIC shares at a lower price than the one set during the IPO’s book-building process.

The Indian stock market requires a boost because only 3% to 4% of Indians possess equity assets. We feel that this figure should be substantially higher because equities have consistently outperformed all other types of financial support, including bonds, real estate, and gold, over time. Let us hope that more Indians become aware of this truth and begin investing in stocks as soon as possible.