Can you share with the highlights of the LIC IPO filed with SEBI on Sunday, 13th Feb?

Here is what you must know about the proposed IPO of LIC:

a)The DIPAM, on behalf of the government of India, has filed the draft red herring prospectus (DRHP) for the LIC IPO with SEBI late on Sunday 13-Feb. The DRHP runs into more than 600 pages.

b)As per the terms of the issue laid out in the DRHP, LIC will offer 31,62,49,885 (31.63 crore shares) to the public as an offer for sale. This will dilute the stake of the government from 100% to 95% and there will be no fresh issue component.

c)LIC has a total issued and paid up capital of 632,49,97,701 (632.50 crore shares), so the current issue of 31.63 crore shares works out to about 5% of the total outstanding capital of LIC.

d)As of now the price band is yet to be announced but actuarial valuation (embedded value) determined by Milliman Advisors has been pegged at Rs.539,686 crore as per the detailed note filed by Milliman in the DRHP filed on Sunday.

e)Normally insurance company valuations are based on embedded with the benchmark multiple ranging between 2.60X and 4.00X. If you conservatively consider 2.6X of EV, then we are looking at valuations of Rs.14,03,184 crore for LIC or $186 billion.

f)On a valuation of $186 billion, a 5% stake sale via OFS size will be worth $9.3 billion or Rs.70,000 crore. If one looks at comparable private sector insurance players, this leaves returns on the table for investors, so hits two birds with one stone.

g)There will be reservation of 10% for policy holders. In addition, there is likely to be discount for retail investors, policy holders and for employees, details of which are likely to be announced closer to the actual date of opening of the IPO.