Last week, LIC filed a Draft Red Herring Prospectus (DRHP) with capital market regulator Sebi enabling the government to sell a 5% interest for an estimated Rs 63,000 crore. According to recent media sources, the LIC IPO is set to launch on March 10. The IPO of over 31.6 crore shares, or a 5% government interest, is expected to be the country’s largest ever public sale. According to reports, subscriptions for the IPO, which will begin on March 10, will be accepted until March 14.

Facts about the Life Insurance Corporation of India (LIC India)

  1. For more than 65 years, LIC has been providing life insurance in India.
  2. LIC’s AUM was 17.0 percent of India’s anticipated GDP for fiscal 2022 as of December 2021.
  3. The AUM of LIC is more than 3.2 times that of all private life insurers in India as of December 31, 2021.
  4. As of March 31, 2021, LIC’s claim settlement percentage was 98.3 percent.
  5. LIC resolved total maturity claims and annuity payments of Rs. 1,656.6 billion and Rs. 145.7 billion, respectively, in fiscal 2021, accounting for an approximate market share of 87 percent and 91 percent, respectively.

What are the Advantages of the upcoming LIC IPO?

LIC IPO – What makes LIC IPO so unique?

The LIC IPO will be the largest in India’s history. A total of 22.13 crore shares would be sold by the government. LIC is India’s largest insurance business, with a market share of 64.1 percent based on GWP for fiscal 2021. In fiscal 2021, LIC had a market share of around 87 percent in total maturity claims and nearly 91 percent in annuity payouts.

Life Insurance Corporation of India (LIC), the country’s largest life cover provider, will launch its initial public offer (IPO) – the biggest in the history of the Indian capital market – today.

Here are 10 things to know before subscribing to the public issue:

1. IPO Dates

The offer will open for subscription on May 4 (Wednesday) and the last day to subscribe to the IPO is May 9 (Monday).

2. Price Band

The price band for the offer has been fixed at Rs 902-949 per equity share of face value Rs 10 each. However, LIC would offer a discount of Rs 60 to its eligible policyholders while a discount of Rs 45 will be offered to retail investors and employees.

3. When will LIC IPO open for subscription?

LIC IPO will open for subscription between May 4 (Wednesday) to May 9 (Monday)

4. What is the price band for LIC IPO?

The company will sell its shares in the range of Rs 902-949 per equity share. However, it would offer an Rs 60 discount to policyholders and Rs 40 to retail investors and employees.

5. Current Fiscal FY22

The current fiscal FY22’s divestment target was revised to Rs 78,000 crore from the Budget estimates of Rs 1.75 lakh crore and the Centre would like to cash in the LIC IPO to meet its revised divestment estimate.

The IPO drive will have a 50 percent reservation for Qualified Institutional Buyers (QIB), not 15 percent for Non-Institutional Investors (NII), and 35 percent reserved for retail investors.

6. What is the lot size for LIC IPO?

Investors can bid for shares in a lot size of 15 shares and in multiples thereof. At the upper range of the price band, one lot of LIC will be worth Rs 14,235 crore, exclusive of any discount.

7. How much quota is reserved for policyholders in LIC IPO?

There is an employee reservation of 15.81 lakh shares while 2.21 crore shares are reserved for policyholders. Retail and employees will get a Rs 45 discount, while policyholders will get Rs 60 discount.

8. Will the LIC IPO benefit the existing policyholders?

Yes, existing policyholders will benefit from the IPO launch as the operations will become more transparent. Another benefit is that the policyholders will get a chance to invest in the company.

9. How profitable is LIC?

The AUM of LIC jumped about 10 per cent to Rs 37, 46,404.47 at the end of the financial year 2021 from Rs 34, 14,174.57 crore in the previous year. The net profit of the company jumped to Rs 2,974.14 crore from Rs 2,710.48 crore during the period under review. For the period ended December 31, 2021, LIC had a total AUM of Rs 40, 90,786.78 crore and reported a net profit of Rs 1,715.31 crore

10. How big is LIC?

LIC is the fifth largest life insurer in the world by life insurance gross written premium (GWP) and the 10th largest insurer globally by total assets. At the end of FY21, LIC had a 66 per cent market share in new business premium (NBP).

11. Lot sizes

Investors can bid for a minimum lot size of 15 shares and in multiples thereof. A retail investor can apply for up to 14 lots or 210 shares for an amount of Rs 1,99,290. The maximum bid amount for retail investors, LIC employees and LIC policyholders has been capped at Rs 2 lakh.

12. When will LIC shares list?

Shares will be allotted to successful bidders on May 12, and the refund to unsuccessful bidders will be credited on the next day. Shares will be credited to the demat account by May 16 and the stock is expected to list on the bourses on May 17.

13. What is the LIC’s market value?

The state-run insurance colossus has a market capitalization of Rs 6 lakh crore. The inherent value of Rs 5.4 lakh crore is nearly 1.12 times this estimate.

14. What is the size of LIC?

LIC is the world’s fifth largest life insurer by gross written premium (GWP) and the world’s tenth largest insurer by total assets. LIC had a 66% market share in new business premiums at the end of FY21 (NBP).

15. Offer details

The government of India is aiming to garner Rs 21,000 crore at the upper end of the price band by liquidating 3.5 percent of its stake in the insurance behemoth. The IPO is entirely an offer-for-sale of 221,374,920 equity shares by the government, which will receive the entire proceeds from the IPO. Out of the shares on the block, up to 1,581,249 units are reserved for employees and up to 22,137,492 are reserved for the policyholders.

Things to worry

LIC has been consistently losing market share to private peers. Currently, LIC holds 64 percent market share in terms of total life insurance premium. It averaged a compounded annual growth rate (CAGR) of 9 percent during FY16-21, while private insurers grew at 18 percent.

The government will remain the largest shareholder and key manager even after the IPO. Thus, any future government intervention might be detrimental to shareholders.

LIC doesn’t have a strong digital presence and 90 percent of its policies are sold by agents. If this trend continues, then the total cost is likely to increase for LIC, going forward.

LIC is also sitting on a mark-to-market (MTM) loss of Rs 6,028 crore. LIC said in its draft papers that of the Rs 11,265 crore worth of debt papers of mispriced insurance policies, papers worth Rs 5,351 crore are non-performing assets (NPAs) for which full provisioning has been done at an amortised cost, and if this transaction is shown in the balance sheet, LIC would have to show a loss of Rs 6,028 crore.

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