Govt slashes expected proceeds from LIC IPO to a third

The latest reduction is due to the government's decision to price the issue between Rs 902 and Rs 949 per share. Image: Shutterstock

Mumbai (Reuters) - India expects to raise up to $2.74 billion from selling a 3.5% stake in Life Insurance Corp's (LIC) IPO, according to a prospectus filed late on Tuesday, just a third of its original hopes after investors questioned the insurers' growth potential.

The amount New Delhi expects to raise from the initial public offering (IPO) of the state-owned insurer is a billion dollars short of its projection last week, and a third of the more than $8 billion it initially planned to raise in February.

The latest reduction is due to the government's decision to price the issue between Rs 902 and Rs 949 per share, instead of the more than Rs 1,100 per share envisaged last week, according to the IPO papers.

At the lower end of the current price band, the government would raise $2.61 billion.

The government has tempered its expectations for the issue after roadshows with nearly 180 big investors flagged up concerns about growth prospects for the insurance giant that dominates nearly a third of the market.

New Delhi now values LIC at nearly Rs 6 trillion, instead of the Rs 17 trillion it initially expected.

LIC has been losing market share for over a decade to private players such as HDFC Life and ICICI Prudential Life.

LIC's IPO is set to open on May 2 for anchor investors and for subscription on May 4, and close on May 9.

Employees and retail investors will be given a discount of 45 rupees per share, while LIC policyholders will be offered a discount of 60 rupees.

After a reservation for policyholders and shareholders, the remaining shares will be allocated in a ratio of 50% to qualified institutional buyers (QIB), 35% for retail and 15% for non-institutional investors.

Out of the QIB's portion, around 60% will be reserved for anchor investors.

LIC filed a preliminary IPO prospectus on Tuesday with the regulator.

LIC management and investment bankers will hold roadshows in six cities across India - Mumbai, New Delhi, Bengaluru, Ahmedabad, Rajkot, Kolkata - where they will meet potential investors and analysts starting on Wednesday, a source involved in the deal told Reuters earlier in the day.

The road shows are likely to finish by the end of this week. In the last two years, physical roadshows came to a grinding halt due to the COVID-19 pandemic, but with infections down, LIC management has decided to restart the process.

Online roadshows covering investors across other regions will continue, the source added.