LIC IPO Opens Tomorrow | Key Things To Know In Details About India's Largest IPO Before Investing

The government seeks to offload 3.5 per cent stake in the state-run insurance behemoth to fetch Rs 21,000 crore through LIC IPO

New Delhi: The country’s largest life insurance provider, Life Insurance Corporation of India (LIC), will launch its initial public offer (IPO) for general investors on Wednesday (May 4).

The government seeks to offload 3.5 per cent stake in the state-run insurance behemoth to fetch Rs 21,000 crore through LIC IPO. The issue, which will be open for subscription on May 4, will close on May 9.

In the Indian capital market, this is the biggest listing to date.

Here are a few things to know before subscribing to the LIC IPO.

• Dates for subscription

For subscription, the offer will open on May 4 (Wednesday), while the last day to subscribe to the IPO is May 9 (Monday).

• Price band

The price band for the IPO has been fixed at Rs 902-949 per equity share of face value Rs 10 each.

LIC will offer a discount of Rs 60 to its eligible policyholders and a discount of Rs 45 to retail investors and employees.

• Offer details

The government is eyeing to raise Rs 21,000 crore at the upper end of the price band by diluting 3.5 per cent of stake in LIC. This is entirely an offer-for-sale IPO of 221,374,920 equity shares by the government, which will receive the entire proceeds from the IPO. Of the total offer size, 50 per cent of the net offer will be reserved for qualified institutional buyers, 35 per cent for retail investors, and the remaining 15 per cent for non-institutional investors.

• For investors

Investors can bid for a minimum lot size of 15 shares and in multiples thereof. For retail investment, a person can apply for up to 14 lots or 210 shares for an amount of Rs 1,99,290. RS 2 lakh is the maximum bid amount for retail investors, LIC employees, and LIC policyholders.

• Profile of LIC

LIC is the biggest life insurer in the country across the parameters of GWP (gross written premium), NBP (new business premium), number of individual policies issued, and the number of group policies issued. It has a market share of 61.4 per cent in NBP (individual and group), compared to the nearest competitor, which has a market share of 9.16 per cent on an NBP basis (individual and group).

• Financials at a glance

At the end of FY21, LIC had assets under management of Rs 37,46,404.47 crore, growth of 10 per cent from the AUM of Rs 34,14,174.57 crore a year back. The net profit jumped to Rs 2,974.14 crore from Rs 2,710.48 crore during this period.  

• Strengths

The strengths of LIC lie in the fact that it is the fifth-largest life insurer globally by GWP and the largest player in the fast-growing and underpenetrated Indian life insurance sector. LIC is a trusted brand and has a customer-centric business model and pan-Indian network. It operates mostly via an omni-channel distribution network with an unparalleled agency force; it is the largest asset manager in India with an established track record of financial performance, profitable growth, and has a robust risk management framework.

• Things to look for

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

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 per cent of its policies are sold by agents. If this trend continues, then the total cost is likely to increase for LIC, going forward.