State-owned insurance group and investment company, Life Insurance Corporation of India (LIC), last week, filed a draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (Sebi) to raise funds via an initial public offering (IPO). The IPO consists of an offer for sale of up to 316.25 million shares by the Government of India. The LIC IPO is likely to be the biggest IPO in India till date.
LIC IPO: When Will it Happen?
The initial public offering of over 31.6 crore shares or five per cent of the government’s stake is likely to hit the D-street in March and employees and policy holders of the insurance behemoth would get a discount over the floor price.
LIC IPO: What’s in it for Policyholders
As per the prospectus, employees and policyholders of the country’s largest insurer will be getting a discount over the floor price. The portion planned to be reserved for policyholders can go up to maximum of 10 per cent. “The aggregate of reservations for eligible policyholder(s) shall not exceed 10 per cent of the offer size,” the DRHP stated. Employee quota will be capped at 5 per cent.
LIC IPO: Which Policyholders are Eligible?
To invest in the much-awaited LIC IPO, policyholders must have two things: policyholder’s PAN should be updated on the LIC portal, policyholder should have a demat account.
LIC IPO: Policyholder’s Discount
The quantum of potential discount will be specified closer to the bid opening date, at least two working days prior. The policyholders’ quota in the IPO – a first-of-its-kind – was created after the central government permitted LIC to designate policyholders as one of the reserved categories, as per an amendment made last year to the LIC Act, 1956.
LIC IPO: How can Policyholders check PAN-LIC status
- Visit https://linkpan.licindia.in/UIDSeedingWebApp/getPolicyPANStatus
- Enter Policy Number, Date of Birth, and PAN information, as well as the captcha. Then press the Submit button.
LIC IPO: How to PAN Link Policy Number
Policyholders can link their policies with their PAN via the online method. However, the policyholders who are not well-versed with the technology can ask their agents to do it for them.
LIC IPO: Market Share
LIC has a majority share of the life insurance market in India. The government, which hopes to raise as much as $12 billion from selling a stake in the IPO, expects the proceeds will help it bridge a deficit gap this fiscal year.
LIC is not only the world’s largest when it comes to home-market share with over 64.1 per cent of the total gross written premium as of 2020 but also the one that offers the highest return on equity at 82 per cent, apart from being the third largest in terms of life insurance premium, says a Crisil report.
LIC IPO: Financials
LIC has reported a profit after tax of Rs 1,437 crore for the first half of the financial year 2021-22 as compared with Rs 6.14 crore in the year-ago period. Its new business premium growth rate stood at 554.1per cent in H1FY22, compared with 394.76 per cent during the corresponding period of the preceding financial year.
LIC IPO: Embedded Value
According to the DRHP, the embedded value has been set at Rs 5.39 trillion. Usually, the companies trade at around 3-4 times the EV.
LIC IPO: How much stake government is selling?
The government has notified that it will sell 5 per cent of the total capital in the form of shares. So, it will retain a 95 per cent stake in the company.
LIC was formed on September 1, 1956, by merging and nationalising 245 life insurance companies in India, with an initial capital of Rs 5 crore. Even as a lot of private life insurers have arrived at the scene, LIC continues to be the dominant life insurer.
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