The LIC board has approved a cut in its initial public offering issue size from 5 per cent to 3.5 per cent, sources have said. The government will now dilute 3.5 per cent of its shares in LIC for Rs 21,000 crore, subject to approval of the capital markets regulator Securities and Exchange Board of India, or SEBI.
In the draft red herring prospectus, the government had proposed sale of its 5 per cent equity. This would value LIC at Rs 6 trillion.
Earlier government estimates had called for the insurer to be valued at around Rs 17 trillion.
The drastic lowering of ambitions for the IPO - which would still be India's largest to date - is seen as a setback for the government, which had positioned the sale as the first and biggest of a wave of privatisations aimed at replenishing state coffers.
"Investors have become very risk averse in the last few months. After roadshows we realised there was no point in putting high valuation up front. Higher valuation can be discovered post the listing. After all, the government will still hold nearly 95 per cent of the issue," news agency Reuters reported on Friday, quoting an unnamed source.
The LIC IPO is likely to be launched in the first week of May, investment banking sources told Reuters.
The government had initially wanted to list LIC in the last financial year that ended March 31 but had to delay the sale after Russia's invasion of Ukraine triggered a market rout.
The 66-year-old company dominates India's insurance sector with more than 280 million policies. It was the fifth-biggest global insurer in terms of insurance premium collection in 2020, the latest year for which statistics are available.
Investors have been concerned that LIC's investment decisions, including those in loss-making state companies, could be influenced by government demands.