February 22, 2025

LIC IPO: Expected Valuation To Be About Rs 14 Lakh Crore

By Linus Garg
First publised on 2022-02-10 08:51:38

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Linus tackles things head-on. He takes sides in his analysis and it fits excellently with our editorial policy. No 'maybe's' and 'allegedly' for him, only things in black and white.

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Although the government is expected to file the red herring prospectus in the next couple of days, reports suggest that it is looking at a valuation of Rs 13-14 lakh crore for LIC ahead of the IPO. The valuation is based on the embedded value (the measure of the consolidated value of shareholder's interest in an insurance firm) of the insurance giant which is expected to be more than Rs 5 lakh crore. The market value is generally a four to five time multiple of the embedded value.

With the government expected to dilute 4-5% share, the issue size could be between Rs 65000-75000 crore, making it by far the largest IPO in India. It is also expected to introduce many new retail investors to the stock market as the LIC will give an opportunity to its policy holders to invest in the IPO. But many policy holders in small towns and rural areas do not invest in stocks and maybe do not even have a demat account. It will be difficult for many of them to open such accounts to be able to take advantage of the offer.

But there is no doubt that despite the expected huge size of the IPO and the gigantic valuation, there is a strong buzz about the LIC IPO, not only in India but across the world. The grey market expects a good premium and retail investors are gearing up to invest in the IPO. The success of the LIC IPO is also expected to kick- start the disinvestment process which was ignored in FY2021-22. Since the government has committed to invest enormous amounts in infrastructure in the next fiscal, it must look at disinvestment as a big source of generating funds.