The government announced plans to undertake an initial public offering (IPO) of the Life Insurance Corporation of India (LIC). The LIC IPO DRHP was submitted on February 13. According to a filing with India’s Securities and Exchange Board, the government offers 31.62 crore shares, or 5% of the equity, in the IPO. By March 2022, the Centre plans to launch an initial public offering (IPO) and float LIC on stock exchanges.
This IPO aims to bring more discipline and transparency to the company’s operations while also allowing individual investors to participate. You should be aware of share market timings.
Because privatization and listing are two different things, a public offering does not imply that LIC will be privatized. The government intends to sell a portion of its interest through this IPO. The following are some critical aspects of the IPO:
What is the LIC Initial Public Offering (IPO)?
The LIC has always been a government-run organization. When a firm decides to go public or list on the stock exchange, it is known as an IPO.
Before you invest in LIC IPO shares, there are a few things you should know:
- India’s finance minister, Ms. Nirmala Sitharaman, first announced the disinvestment of stock in LIC in the Union Budget 2020.
- The LIC Act of 1956 has been amended to make the IPO roll-out easier. According to the agreement, LIC will become a publicly traded business and issue quarterly earnings reports and balance sheets. Furthermore, all advancements inside the company must be made public following the IPO.
- To participate in the proposed public offer, LIC has asked its policyholders to update their Permanent Account Number (PAN) and ensure that they have valid DEMAT accounts.
- Global investors such as BlackRock and Blackstone are allegedly interested in the anticipated IPO’s anchor issue. Mr. Arijit Basu, the former MD and CEO of SBI Life Insurance and the former MD and CEO of State Bank of India has been hired to assist with the launch. Pre-IPO consultants include Deloitte and SBI Capital.
- Milliman Advisor LLP India, an actuarial consultancy, is in charge of determining the company’s embedded value.
Meanwhile, Concept Communications, based in Mumbai, has been chosen as the advertising agency. The public offering’s total value is currently projected to be between Rs. 70,000 and Rs 1 lakh crore. According to the prospectus, the LIC IPO price band will be determined in due course two days before the public offer opens. According to the draught prospectus, LIC has an embedded value of Rs 5,39,686 crore as of September 30, 2021. The insurer has revealed its embedded value for the first time, an actuarial measure for evaluating a life insurer.
- The embedded value is calculated using the life insurer’s adjusted net worth, including free surplus and capital, as well as the discounted value of future profits from in-force policies.
- According to the DRHP, LIC’s assets under management (AUM) amounted to Rs 39.6 lakh crore as of September 2021.
- As of March 31, LIC had a 66 percent market share in New Business Premiums, with 283 million policies and 1.35 million agents.
- For its impending IPO, LIC has requested SEBI exemption on deposits with exchanges. Companies planning an IPO must deposit with stock contacts a sum equal to 1% of the copy size, which is returned to the issuer when the shares are sold.
- Only ten banks were chosen to manage the IPO out of 18 domestic and international banks.
- They were picked for their expertise in life insurance, marketing techniques, retail, and worldwide distribution experience.
The following items are currently included in the IPO’s allocation:
Even after the IPO, the government will own a majority interest.
TuhinKanta Pandey, Secretary of the Department of Investment and Public Asset Management (DIPAM), stated that the IPO is a 100 percent OFS (offer for sale), meaning that all profits will go to the government to assist it in meeting its disinvestment target and that LIC will not issue any new shares.
After the offer, the Employee condition Portion will not be at 5% of our equity share capital. The Policyholder stipulation Portion cannot be more than 10% of the total offer size.
Policyholders may be eligible for a reduction in the offer price
Reinventors will receive 35 percent of the offering, or approximately 11.1 crore shares, from LIC.
Corporation may distribute up to 60% of the QIB (qualified institutional buyers) component to anchor investors discretionary.
Although the draught red herring prospectus for the IPO has been released, they still don’t know when the LIC IPO will occur in 2021 or any other IPO specifics. According to many government authorities, the LIC IPO 2022 would take place before the end of March this year. It is anticipated to debut in the first half of 2022.