LIC policyholders likely to get Rs 60 discount on shares, IPO opens May 2

LIC IPO price band likely to be set at Rs 902-949 a share

The Centre is learnt to have set the price band for the initial public offering (IPO) of Life Insurance Corporation of India (LIC) at Rs 902-949 a share, and may offer a discount of Rs 60 to the policyholders. Retail investors and the employees of LIC, on the other hand, may get a discount of Rs 45 on subscribing to the shares of India’s largest insurer, a senior government official said.

The board of LIC has approved the discount to be offered to the three categories, reservations for policyholders and employees, and the issue dates, the official added.

The government may sell 221.3 million shares, or 3.5 per cent stake, in LIC through the offering. This would help the government garner Rs 21,000 crore, valuing the insurer at Rs 6 trillion. The Securities and Exchange Board of India has approved the reduction in the issue size, the official said.

An exemption on lowering the issue size was required from the market regulator as the existing guidelines mandate a minimum offering of 5 per cent equity and Rs 5,000 crore worth shares for companies valued over Rs 1 trillion.

“All regulatory approvals for LIC’s IPO are now in place,” the official said.

About 10 per cent of the issue size, or 22.1 million shares, may be reserved for LIC policyholders, while 1.5 million shares would be reserved for its employees, the official said. After considering the reservations, the remaining 50 per cent shares would be allocated to qualified institutional buyers (QIBs), 35 per cent to retail investors, and 15 per cent to non-institutional bidders. About 60 per cent of the QIB quota has been reserved for anchor investors, the official said.

The Centre had reserved 10 per cent of the issue for LIC policyholders and had made provisions for the same in the LIC Act. “Policyholders have played an important role in LIC’s journey and growth. The unanimous view, within the government, was to offer them a higher discount as a reward, for availing the issue,” the official said. There are about 10.8 million policyholders of LIC who have linked their policies with PAN and have a demat account. The government is hoping most of these eligible policyholders would avail the reserved quota in the IPO, the official added.

The IPO would open on May 2 for anchor investors, and on May 4 to May 9 for the public. The red herring prospectus (RHP) for the issue would be filed on Tuesday night, or latest by Wednesday morning, the official said.

LIC is set to formally announce the details of the IPO on Wednesday.