Is the government planning to file for the LIC IPO in this month and when is the issue expected to hit the market?

While there is no official confirmation yet, the filing of the draft red herring prospectus (DRHP) for LIC is expected to happen in the third or fourth week of January. This has been reported from reliable sources, although there is not confirmation either from the government or the DIPAM. The only thing that remains to be seen is if LIC is able to complete the pricing and road shows by that time.

One of the core factors responsible for the delay in the IPO was the embedded value on which Milliman Advisors were working on. Now, it has been apparently set at $150 billion, and the IPOs by insurance companies are normally priced at a premium to the embedded value. This will make LIC the third largest Indian company on the basis of market cap after Reliance Industries and TCS. Government is yet to decide between offering 5% and 10%.

Regarding your query on when will he issue come out, we re first assuming that the DRHP will be filed by the end of January. Post that, SEBI approval process normally takes between 2 to 3 months. As a special case, such approvals can be fast-tracked or the government may not push too much if it has reconciled to the idea of pushing the IPO to FY23 instead of completing the IPO in FY22 itself. Jun-23 quarter looks likely due to complexity and size.

LIC IPO will surely rely largely on insurance support but it is likely to use a strategy beyond that. LIC has over 30 crore policies and around 25 crore policy holders. That is a huge captive market to tap. Already LIC policies and PAN cards are being linked to facilitate this process of tapping the LIC policy holders for investing in the IPO. In addition, LIC has 12 lakh LIC agents who can push IPO sales quite effectively through their established networks.

To be frank, we need to await the filing of the draft red herring prospectus. The road shows and broker meets will start only after that to give a clearer picture of the IPO appetite. LIC has implications, not only for the divestment program but will also crowd out other IPOs. Most IPOs are currently in the side lines waiting for the LIC date to be announced. The sooner it is done, the better it will be.