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April 25, 2022

India reduces LIC’s divestment target to 3.5%, SEBI to approve DRHP soon

The Indian government has filed a revised draft red herring prospectus (DRHP) for the listing of the Life Insurance Corporation of India (LIC).

The news comes after the government decided to reduce the IPO size from 5% to 3.5% in the wake of the ongoing Russia-Ukraine war.

The Securities and Exchange Board of India (SEBI) is likely to approve the initial document soon, Moneycontrol reported citing CNBC TV18.

The revised stake sale is expected to fetch around INR300bn ($3.9bn) for the government at a valuation of nearly INR6 trillion ($78.5bn), which is 1.1 times the embedded value.

The proceeds from the IPO would be used to bridge the gap between the government’s budget deficits.

“Investors have become very risk-averse in the last few months. After roadshows, we realised there was no point in putting a high valuation upfront. A higher valuation can be discovered post the listing. After all, the government will still hold nearly 95% of the issue,” a source was quoted by Reuters as saying.

An investment banking source told the news agency that the IPO could be launched in the first week of May.

Initially, the government had planned to launch LIC’s IPO before 31 March 2021, but the fallout from the turmoil caused by the Russia-Ukraine war forced the authorities to halt the plans.

Last week, the Indian government amended rules to allow up to 20% foreign direct investment (FDI) in the life insurer.

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