LIC IPO: Govt may increase allotment size to align offer with Sebi's rules

The market regulator has approved LIC's updated draft red herring prospectus (DRHP), paving the way for the Centre to file the red herring prospectus (RHP) for India's biggest IPO.

The Centre may increase the allotment of its shares in the initial public offering (IPO) of Life Insurance Corporation of India (LIC), to align the offer with the Securities and Exchange Board of India’s (Sebi’s) listing guidelines.

The market regulator has approved the insurer’s updated draft red herring prospectus (DRHP), paving the way for the Centre to file the red herring prospectus (RHP) for India’s biggest IPO.

The consultations on the updated DRHP filed by LIC have involved aligning the IPO with the Sebi’s regulation that states listing by companies with a market value over Rs 1 trillion will require them to make make an offer of a minimum Rs 5,000 crore and 5 per cent of shares.

The DRHP filed by LIC had stated that the government would offload 5 per cent of its stake or 316 million shares in the insurer, of total 6.32 billion shares held. The RHP may increase the size of the issue slightly, from the existing 316.2 million shares. 

“The allotment size may increase based on Sebi’s requirement,” said an official.

The current market conditions have turned favourable for listing of LIC as volatility has reduced, the official said. The India VIX — an indicator to assess market volatility — closed at 17.91 on Monday, from a peak of 29 recorded in March. The government is looking to list LIC in April as a delay beyond May 12 would require the insurer to make a fresh filing with the markets regulator.

The RHP – which shall include the issue size and timelines for listing -- will be filed with Sebi after approval from the ministerial panel.

The Centre and LIC had filed an updated DRHP with Sebi at the end of March, responding to the regulator’s queries on disclosure of risks and whether the valuation of the insurer at the time of DRHP submission and listing would remain the same. The regulator had also advised legal advisors to check adequate disclosure of risks for investors in the DRHP. It sought assurance on claims made in the offer regarding market share and business, among others.

The insurer had also updated its financials for the December quarter (Q3) of FY22, fulfilling a requirement of the US Securities and Exchange Commission (SEC). The insurer reported a net profit of Rs 234.91 crore in the December quarter.