Business & Investment

The LIC IPO may not be as huge as it is hyped.This is the reason

New Delhi: Government lays the groundwork for parliamentary approval LIC Conduct and promote a mega IPO for Life Insurance Corporation, a huge insurance company. Market regulator Sebi has made some changes to the 1957 securities contract rules to help quickly track down issues.

Reading between the lines of these regulatory measures, market watchers say the long-awaited problem may not be as huge as expected, and the government may sell relatively less than the current forecast. ..

It’s a clue they draw from the tweaks that Sebi has just made by law.

What are the tweaks?

The Sebi Board has reduced the need for a minimum initial public offering size from 10% of post-issue market capitalization to 10,000 chlores and 5% of post-issue market capitalization increments of Rs 10,000. I did. More than crawl.

Such issuers must acquire at least 10% of public shares within two years of listing and at least 25% of public shares within five years. Companies currently approaching IPO Mart should offer at least 10% of their post-offer shares in a public offer and increase their minimum free float to 25% within three years.

Therefore, if the market capitalization after issuance of LIC was estimated to be 8-10 rupees, the issue size was 80,000-1,000,000 rupees according to the old rules, but can now be reduced to 45,000-55,000 rupees. .. .. Even at that scale, LIC could be the largest IPO ever in the domestic market.

“The change in MPS (Minimum Public Equity) standards is very appropriate as it will make it easier for very large companies like LIC and many tech companies with high valuations to make domestic offers. That’s what Chairman Prithvi Haldea said. Of the PRIME database.

What does that mean for LIC?

The insurance giant could be comparable to Saudi Aramco in India in terms of valuation. According to market analysts, the new norms of market regulators give governments time and flexibility to test LIC water bodies. According to media reports, the government had previously stated that it could sell about 10-15% of LIC’s stake through an IPO.

“The government doesn’t want to sell most of the state insurance companies in one shot. Test the depth of the big problem. IPOs unleash the true value of the company,” said RBSA Advisors LLP Managing Director and CEO. RajeevR Shah says.

Other market watchers, given the current euphoria of the primary market and the surge in demat accounts, LIC IPO.. Gaurav Garg, Head of Research at CapitalVia Global Research, said:

Need for fine tuning

LIC is India’s finest gem and the government owns a 100% stake in it. The government does not want to fail in this sale of shares. The appointment of a professional actuarial company highlights the government’s enthusiasm for determining fair valuations.

“We need to deal with the uncertainty of LIC’s investment in some unlisted companies, its large land ownership, and its investment in permanently unprofitable stocks. Allotted before jumping guns. We have to wait for reports from other agencies, “Garg said.

“The government wants to leave something on the table for investors. Trimmed issues leave a decent headroom,” says Shah. “But the government doesn’t want to undervalue assets as it does with IRCTC.”

Once bitten, shy twice

LIC’s IPO is unlikely to be positively evaluated, but New Delhi does not want to ask for a modest price for it. Garg of Capital Via said the government has taken a balanced approach to selling assets.

One of the key factors in determining the size and price of a LIC IPO is the huge withdrawal target set by the government. The government has budgeted Rs. 1.75 from the sale of shares in public sector companies and financial institutions. Later, Prime Minister Narendra Modi set the goal even higher, saying he wanted to raise at least Rs. 2.50 from this year’s withdrawal and strategic sale.

Historically, the government has rarely achieved its annual investment cuts target, said Nitin Mukhi, associate director of RBSA Valuation Advisors.

Analysts say LICEPO is not the main focus of the government for the coming fiscal year. Instead, the goal is to successfully withdraw strategically from BPCL, Air India, Concor, Shipping Corporation of India, and two PSU banks and one insurance company.

I have a lot of work to do

The LIC IPO could generate a lot of hype among investors when it hits the market later this year, but it still requires a lot of work. This is a big move, and the government is said to have frequently used insurance companies as a “last resort investor” in its investment withdrawal program, which poses a major challenge after listing. “We have to wait for the composition of the management and how much the government says about the post-listing schedule,” Garg said.

IPOs have the potential to add new flavors to the equity market, demonstrating strong and sufficient demand. RBSA adviser Shah said the market has its own spirit, which can be unreasonable or polarized at different times.

The LIC IPO may not be as huge as it is hyped.This is the reason The LIC IPO may not be as huge as it is hyped.This is the reason

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