LIC Policyholders Discount

LIC policyholders discount is likely to be offered at 5 percent to its policyholders in the upcoming initial public offer. The IPO will reserve up to 10 percent of the issue size for its policyholders. The LIC IPO may come with a discount for policyholders and also employees and retail investors as per sources.

The much-awaited mega initial public offering (IPO) of insurance company Life Insurance Corporation of India (LIC) may be launched with a discount for its policyholders as the company looks to file its draft red herring prospectus (DRHP) by mid-Feb. The government is likely to sell a 5-7 percent stake in the IPO, to raise as much as ₹65,000-75,000 crore from the issue.

LIC Policyholders discount and Shareholders

The embedded value (EV) of LIC could be more than ₹5 lakh crores. With LIC policyholders discount expected to be fixed at 5 percent, the LIC Shareholder fund has been increased to ₹6,600 crores from ₹100 crores for the purpose of accommodating a larger shareholder base ahead of its initial public offering.

The size of the LIC shareholder fund is increased by retaining two years’ dividends and issuing fresh capital. Increasing the size of shareholder funds will boost the number of shares for allotment in the state-owned insurers’ IPO which will be the amount of equity that belongs to its shareholder.

As per the Union Budget, the government had increased the share capital of LIC to ₹25,000 crores, with 25 billion shares of face value ₹10 each. It also empowered LIC to reduce the face value of shares and divide the authorized share capital into equity share capital.

LIC POLICYHOLDERS DISCOUNT

There are reports suggesting the face value getting reduced to ₹1 which means the value of a share of LIC at 2x embedded value will be around ₹150-170. This would also mean that the equity capital increasing to ₹6,600 crores will increase the number of shares to 66 billion. The Centre owns a total of 6.32 billion shares in the state-owned insurer company.  With face value minimized to ₹1 from ₹10, the total number of shares could go up to 250 billion.

The EV (Embedded Value) of the government-owned insurance company is finalized by the actuary Milliman Advisors to over ₹5 trillion which will be shared with IRDAI (Insurance and Regulatory Authority of India). Similarly, if the state-owned insurer is 2.5x its EV, the valuation will be around ₹12.5 trillion with the shares being priced around ₹180-200 apiece.

With reports suggesting LIC policyholders discount to be announced soon, all eyes are on the date of the state-owned insurer’s draft filling.

Read more to know about how to apply for LIC IPO.

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