Life Insurance Corporation (LIC) on Wednesday said it will launch its initial public offer (IPO) on 4th May and the issue will close on 9th May.
The state-owned insurer said the government will be selling shares in the price band of Rs 902-949. The government plans to offload 3.5% stake or 22.13 crore shares in the company and raise Rs 20,557.23 crore. This is well short of earlier projection of about Rs 60,000 crore.
In the IPO, staff and policyholders will be receiving a discount. According to the LIC DRHP filed with SEBI, up to 10% will be reserved for eligible LIC policyholders under the Policyholder Reservation Portion. NRI policyholders and other policyholders who do not reside in India are not eligible to apply for the Policyholder Reservation Portion.
As per the FAQ section in the LIC DRHP, “Whether NRI policyholders or other policyholders residing out of India can apply in the Offer? No, only resident Indians can apply.”
If you are an LIC policyholder interested in participating in the insurer's anticipated initial public offering (IPO), you must ensure that your PAN information is current in LIC's systems and that you have a demat account.
The LIC published an advertisement in leading newspapers encouraging policyholders to update their Permanent Account Number (PAN) details and open demat accounts in order to participate in the anticipated initial public offering.
Through the policyholder Reservation Portion, policyholders with lapsed LIC policies can apply for shares in the LIC's initial public offering (IPO). All policies that have not exited LIC records due to maturity, surrender, or the policyholder's death are eligible for reservation under the Policyholder Reservation.
Under the Policyholder Reservation Portion category, only one of the two can apply for Equity Shares. In the insurance records, the PAN number of the applicant Bidding in the Offer (you or your spouse) must be amended. The applicant must have a demat account in his or her own name, and if the account is joint, the applicant must be the first/primary account holder.
According to the LIC management, there is an employee reservation of 1.58 crore shares while 2.21 crore shares are reserved for policyholders.
Investors can bid for shares in a lot size of 15 shares, and multiples thereof. Retail and employees will get Rs 45 discount, while policyholders will get Rs 60 discount.
Half of the shares are reserved for qualified institutional buyers (QIB), 15% of the shares will be reserved for non-institutional investors while the rest is for retail investors.
Despite its reduced size, this is the largest IPO ever in India. It leaves behind the maiden issue of Paytm that came last year whose size was Rs 18,300 crore. The IPO values LIC at Rs 6.07 lakh crore.
Shares will be allotted to successful bidders on 12th May, and the refund to unsuccessful bidders will be credited on the same day. Shares will be credited to the demat account by 16th May and the stock will start trading in the secondary market from 17th May onwards.
Analysts are expecting record demat and trading opening in the coming days thanks to increased investor participation due to the IPO. Many brokers have already seen massive mobilization of users. For instance, Axis Securities said it opened around 45,000 accounts for the IPO alone last month. Of these, 40% of customers are new to the market.
Some analysts see weakness in the stock post listing but that may just be for the short term. In the long run, the counter may make money for investors they say.