Interested In LIC IPO? Here’s What Policyholder Should Not Miss About The Issue

Policyholders bidding under the ‘Policyholder Reservation Portion’ can bid through the Applications Supported by Blocked Amount (ASBA) and the UPI mechanism

Life Insurance Corporation IPO

New Delhi: Life Insurance Corporation (LIC) has set the stage for the country's biggest-ever public offering by filing draft papers with capital market regulator Securities and Exchange Board of India (Sebi) for the sale of 5 percent stake of LIC by the government for an estimated Rs 63,000 crore.

Going by the draft red herring prospectus (DRHP), the insurance major boasts of nearly 29 crore policyholders and a 74.6 percent market share in terms of a number of individual policies issued for the financial year 2021.

Here Are Things To Know For Policyholders

Policyholders should know that the company has reserved up to 10 percent of the offered size for this category. Further, the government aims to give a discount to the policyholders in the IPO. However, the issue size is not yet disclosed and it is expected to be announced in due course.

Bidding Process: Equity shares in the IPO will be allotted to all successful bidders including the policyholders only in the dematerialized form which means that investors should have a Demat account for applying in the offer. Also, note that a policyholder cannot apply from the Demat account of his or her spouse or son, or a relative.

Besides, policyholders bidding under the ‘Policyholder Reservation Portion’ can bid through the Applications Supported by Blocked Amount (ASBA) and the UPI mechanism. According to the draft prospectus, the total value of allocation to an eligible policyholder cannot exceed Rs2 lakh after a discount.

Bidding in IPOs is done in a ‘lot’, the minimum number of shares that an investor needs to bid for. However, the number of shares in a ‘lot’ will depend on the issue price fixed by the company.

It is important to note that in the case of joint policyholders only one can apply for the equity shares under the ‘Policyholder Reservation Portion’ category.

The PAN number of the applicant bidding in the offer (you or your spouse) needs to be updated in the policy records. A policyholder who does not update his/her PAN before February 28, 2022, will not be eligible to participate in its IPO. 

Also, the applicant needs to have a Demat account in his/ her name, and in case the Demat account is joint, the applicant needs to be the first /primary holder of the Demat account.

Moreover, the proposer of a policy for a minor is eligible for reservation under the Policyholder Reservation Portion.

Eligibility: Remember all those policies that have not exited LIC’s records by way of maturity, surrender, or by way of death of the policyholder will be eligible under the policyholder reservation.

Also, note that the spouse of the policyholder (deceased) who is currently receiving annuities is not eligible to apply in the offer under the category.

What about LIC employees?

The insurance major has extended reservations to its employees in the offer. In a situation when an employee also holds a LIC policy, then an individual can apply under employee, policyholder, and retail portions.

"Application made in the Policyholder Reservation Portion, Employee Reservation Portion and Retail Portion – here all three bids would be considered as valid applications and will not be rejected as multiple bids," LIC clarified in the prospectus.

If you apply under policyholder, employee, retail, and non-institutional portions, then application only made in the policyholder and employee categories would be considered and applications made in the retail and non-institutional portions would be considered as multiple bids and both the bids will be rejected.

Lock-in period: Also, note there is no lock-in period and the policyholders can sell the equity shares immediately on the listing of the equity shares.