The IPO of Life Insurance Corporation is estimated to be of the size of around Rs. 1 Lakh Crores which is going to be a big IPO in the history of the Indian Stock Market. Coal India was the last company that came with its IPO of the whopping size of Rs. 15,000-16,000 Cr. in the past.
Why 2 Installments?
- The Indian Government is quite focused hard on completing of disinvestment target on time.
- Hence, the major question that arises here is that Whether the Market has such capacity to make the IPO worth Rs. 1 Lakh Crores or above successful, Or simply, does the market possess such capacity to absorb such might issue?
- Therefore, the possible solution which seems to be perfectly correct is the bring the IPO in a phased manner i.e., in 2 Installments wherein the first one will be an IPO and another one will be a Follow-On Public Offer (FPO).
- These tranches of IPO of LIC will come in the gap of between few months.
- If so happens, this will be the first time in the country, where the issue will come in installments.
- Also, these may result in changes in the SEBI rules and regulations regarding IPOs. Currently, as per SEBI Guidelines, Promoters cannot reduce their stake to less than 20% within 18 months of the IPO release. Meanwhile, the Promoters of the companies which is having a market cap of Rs. 1 Lakh Cr. can reduce their stake by up to 10% in 2 years.
Certainly, the introduction of the Life Insurance Corporation (LIC) IPOs in the market will impact the existing Life Insurance Companies Stocks like HDFC Life, ICICI Pru Life, etc. Due to less number of listed insurance companies in the stock market in present times, the company enjoys a scarcity premium. Hence, these Life Insurance Companies may witness some loss of scarcity premium, or go through some kind of correction- Time, Price, or both. Life Insurance Sector, being one of the most underpenetrated sectors in India, one should certainly keep this sector on close watch and pick strong and good companies.