The much-awaited initial public offering (IPO) of Life Insurance Corporation of India (LIC) is just a few days away. 2021 saw record IPO fund raising of about Rs 1.2 lakh crore. The amount of money LIC alone is likely to raise could be almost half of this figure. After listing, LIC will become the third largest stock in terms of market capitalisation after Reliance Industries Ltd (RIL) and Tata Consultancy Services (TCS).
Amid all the enthusiasm, there are a few risks that investors must take note of. 35 percent of the IPO has been reserved for retail investors. This will amount to about 11 crore shares. India has only about 7.3 crore demat accounts as of October last year.
Also Read: LIC IPO: How UBS views PSU insurer vs peers ahead of mega listing
LIC will also have to comply with Securities and Exchange Board of India’s (SEBI) 25 percent minimum public float. 5 percent stake will be sold via the IPO. This means LIC will have to sell a further 20 percent stake in 3 years. This would result in LIC selling 42 crore shares every year on average.
Analysts are worried if the market will have the appetite to absorb such large supply. Will the government seek an exemption from the 25 percent public float? Will the market regulator play ball? One doesn’t know just yet.
Watch the accompanying video of CNBC-TV18’s Yash Jain for more details.
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