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The Securities and Exchange Board of India (Sebi) has cleared the draft red herring prospectus (DRHP) of the state-owned Life Insurance Corporation of India (LIC). Investment banking sources said the so-called final observations were issued by the market regulator on Tuesday evening.
Following the market regulator’s nod to the IPO papers, the insurer can launch its share sale. However, LIC may not launch its IPO immediately given the current volatile market conditions.
Investment bankers said they would want to wait until an improvement in market sentiment.
The benchmark indices have come off over 8 per cent this year amid a surge in global oil prices following Russia’s attack on Ukraine.
The government is planning to divest a 5 per cent stake via the IPO to mop up between Rs 60,000 crore and Rs 65,000 crore. This would peg LIC’s value between Rs 12 trillion and Rs 13 trillion, making it India’s third most valued listed company.
The final valuation will be decided closer to the IPO.
The mega offering is coming at a time when foreign portfolio investors (FPIs) have hit the exit button. They have pulled out over Rs 1 trillion from domestic stocks this year, so far.
The IPO will test the appetite and depth of the domestic market as it will be by far the largest share sale in India. Paytm’s IPO of worth Rs 18,300 crore currently holds the record. Shares of Paytm have crashed more than 60 per cent since listing.
LIC, which is a household name in the country, thanks to its over 250 million policyholders, has created significant buzz among retail investors. The insurer is banking on large subscriptions from individual investors.
The LIC share sale is being handled by 10 investment banks.
Quick approval
LIC is among the fastest to get Sebi approval for its IPO, just 24 calendar days. The government-owned insurer had filed its DRHP on February 12.
According to the data provided by PRIME Database, this is the quickest Sebi has cleared a DRHP since 2020. Previously the record was held by Mrs Bector Food, the IPO of which took 30 days to get a final observation, while state-owned Railtel Corp took 32 days. However, if one looks at the historical data, for IPOs of at least Rs 500 crore in size, Bank of India at 11 days holds the record for the fastest approval, shows PRIME data, followed by Maruti Udyog (now Maruti Suzuki) at 12 days.
Under Sebi regulations, the regulator can issue its observations within 30 days of the filing of the offer document if certain conditions are met. These include investment bankers, other regulators or agencies, satisfactorily replying to any clarification or additional information sought by Sebi. Last week, Sebi had sought some clarity from investment bankers handling the LIC share sale. Sources said the query was routine.
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