DRAFT RED HERRING PROSPECTUS (DRHP)

Feb. 14, 2022

The Union government has filed a draft red herring prospectus with the stock market regulator for selling 5% of its shares in the Life Insurance Corporation (LIC) of India.

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A Draft Red Herring Prospectus (DRHP) is a document that is prepared to introduce a new business or product to a potential investor.
This is not a final document for an investor, but rather a way of demonstrating value and providing investors with enough information for them to decide whether they want to invest in the company or not.
The filing of the draft red herring prospectus (DRHP) with the Securities Exchange Board of India (SEBI), with all the critical information about LIC’s business operations, is the first regulatory step towards the IPO.
SEBI is required to vet the facts stated in the DRHP and recommend changes if required, before giving the share sale a green signal.
The IPO is an 100% OFS [offer for sale] by the Government of India and entails no fresh issue of shares by LIC.
The conclusion of the LIC’s share sale through an initial public offer (IPO) by March 31 is critical for the government to achieve its disinvestment target for this year, even after it was pared down from ₹1.75 lakh crore to ₹78,000 crore.