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LIC may file draft papers for IPO in Dec; anchor investor talks likely next week

Bankers will start reaching out to potential anchor investors in the initial public offering of Life Insurance Corp. of India next week, as they seek to ensure there’s enough demand for what’s set to be the nation’s biggest share sale.  

A list with the names of about 100 global investors has been shared with the 10 banks working on the deal and the institutions will approach different sets of investors, according to people with knowledge of the matter who asked not to be named as discussions are private.

Banks plan to file the draft IPO prospectus with the markets regulator by the first week of December, once the embedded value of the firm is finalized, the people said.

A LIC representative didn’t immediately respond to an email seeking comment.

Prime Minister Narendra Modi is pushing ahead with LIC’s IPO — which could raise between 400 billion rupees ($5.4 billion) and 1 trillion rupees to help plug a widening budget gap. India is seeking a valuation of between 8 trillion rupees and 10 trillion rupees and may sell a 5%-10% stake in the company as part of a broader divestment target. The government may also allow foreign direct investment in LIC to ensure a diversified and strong demand across various segments of investors. 

The discussions with possible investors will mark a crucial step to take the sale forward. Still, progress has been slow with the calculation of LIC’s embedded value, taking almost eight months so far. The embedded value is the key financial gauge for insurers which combines the current value of future profits with the net value of assets.

The government is pushing to get the IPO across the line by March and any delay won’t be due to a lack of political will, Finance Minister Nirmala Sitharaman said last month.

The government selected 10 banks, including Kotak Mahindra Bank Ltd., Goldman Sachs Group Inc., JPMorgan Chase & Co. and ICICI Securities Ltd., to arrange the sale.

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