Can we expect the LIC IPO to happen in March 2022? What cold be the size of the issue and the pricing?

At least, the government and the DIPAM are extremely positive about completing the LIC IPO by this fiscal year itself, possibly by the second or third week of March. Ministry officials have unofficially confirmed that the LIC IPO draft red herring prospectus (DRHP) would be most likely filed in the last week of January and all relevant details including price band and issue size will be announced at that time.

However, we can make some estimates of the issue size of IPO based on the feed coming in. The government is expecting to raise around Rs.90,000 crore from the LIC divestment. How much percentage the government is required to sell will depend on the valuation arrived at, but the government apparently is targeting Rs.90,000 crore from the IPO. This will depend on the embedded actuarial valuation arrived at by the US based Milliman Advisors.

There are reported in the market about the embedded actuarial valuation being pegged at around Rs.4 trillion. The global benchmark is that the market value of the insurer is around 3.5 times to 4 times the embedded value. That would give LIC a total valuation in the vicinity of Rs.15,00,000 crore or Rs.15 trillion. That would imply that the government will have to dilute about 6% of its equity in LIC to raise Rs.90,000 crore. But these are estimates.

LIC manages total AUM of over $450 billion, which is approximately what the entire mutual fund industry in India manages. The LIC valuation of Rs.15 trillion will effectively peg LIC as the second most valuable company in India after Reliance Industries and it will be more valuable than TCS. LIC will also emerge as the second most valuable insurance company in the world after United Health Insurance of the United States.

Officials confirmed that embedded valuations are likely to be available by end of January and by then pricing model will also be in place. This will prepare LIC to file the prospectus with SEBI for the IPO. The entire IPO process is likely to be specially fast tracked considering that this is going to be a high profile IPO. The road shows for the IPO are likely to start around the last week of January 2022 to gauge demand from global institutions. If it happens in right earnest then LIC should be on target for Mar-22 IPO.