Life Insurance Corporation (LIC) on February 13 filed its draft red herring prospectus (DRHP) with market regulator SEBI to float an initial public offer (IPO). Under the mega IPO, the government will sell five percent in the insurance major for an estimated Rs 63,000 crore through an offer for sale (OFS). The proposed IPO is likely to hit the Street in March.
A DRHP contains the necessary information about a business for a potential investor. It contains important details such as a company's business operations, financials, industry position and peers, as well as information about why it wants to raise money and any key risks involved.
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A DRHP is usually a long document. In case of LIC, the DRHP comprises 649 pages.
Here's how to find key information quickly in the LIC DRHP:
Section 1 of the LIC DRHP (page 1-22) contains general information including forward looking statements by the company.
Section 2 of the LIC DRHP contains details on key risks involved. This section starts at page 23 through page 66.
Section 3 contains a summary of financial information, general information and details such as offer objectives. Potential investors can also find details about LIC's capital structure here. This section starts at page 67 through 105.
Section 4 (page 106-299) contains information about LIC's business, key regulations and policies, and brief history. It also lists its top management, promoters and group companies, as well as its dividend policy.
Section 5 is dedicated to financial information, starting at page 300 through 503. This is usually a DRHP's much sought-after portion among investors. Here one can find information on how the company's financial performance has been like in the past, its cash flow and balance sheet. Information on any financial indebtness can also be found here. LIC had nil outstanding borrowings, as of September 30.
The next two sections, from page 504 through 578, contain information about any outstanding litigations and material developments, any approvals granted by the government, and regulatory disclosures.
Section 8, from page 579 to 581, describes the equity shares and the main provisions of the Life Insurance Corporation Act. The following pages contain embedded value reports and other information such as material contracts and documents for inspection.
(Edited by : Ajay Vaishnav)
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