Introduction of LIC IPO
LIC, the state-owned insurance group, and investment company are all set to hit the primary market with its upcoming IPO. The company has filed its Red herring prospectus (DRHP) with the Securities and Exchange Board of India (Sebi) to raise funds via an initial public offering (IPO). It consists of the offer for sale of up to 316.25 million shares by the Government of India. Moreover, the LIC IPO will be the biggest IPO to date. In this article, we discuss the things to know before investing in LIC IPO.
Things to Know Before Investing in LIC IPO
Here are the pointers you need to know before investing in the LIC IPO.
1. Ms. Nirmala Sitharaman announced the disinvestment of LIC equity in the Union Budget of 2020.
2. An amendment has been made in the LIC Act that once the company gets listed, it has to prepare quarterly earnings reports and balance sheets. Also, any development within the company will be made public.
3. The IPO has made some reserve portion for the policyholder to claim that they have to update their Permanent Account Number (PAN) and make sure that you have the best Demat account. This way, they can participate in the proposed public offer.
4. Global investors, including BlackRock and Blackstone, have shown their interest in the anchor issue of the proposed IPO.
5. The consultant to help with the IPO Launch is Mr. Arijit Basu, the former MD of State Bank of India and the former MD and CEO of SBI Life Insurance. Moreover, companies like Deloitte and SBI Capital are among the pre-IPO advisors.
6. Milliman Advisor LLP India is in charge of calculating the embedded value of the company.
7. KFintech, a Hyderabad-based company, has been appointed as registrar and share transfer agent.
Concept Communications, a Mumbai-based company, has been selected as the advertising agency.
8. Talking about the valuation of the IPO, it is estimated around Rs. 70,000 to Rs 1 lakh crore. According to the prospectus, the price band will be decided two days before opening the public offer.
9. The embedded value of LIC is around Rs 5,39,686 crore as of Sept. 30, 2021.
10. According to the DRHP filed, the assets under management (AUM) stood at Rs 39.6 lakh crore.
11. The company has a 66% market share in New Business Premiums. There are 283 mn policies and 1.35 mn agents till March 2021.
12. It has sought SEBI exemption on deposits with exchanges for its upcoming IPO. Before going live with the IPO, the company must deposit an amount equivalent to 1% of the issue size with stock exchanges. The amount is returned to the issuer after the share sale.
13. To manage the IPO, there are 18 banks, both domestic and international; only 10 are selected for the management.
14. The banks are chosen based on their knowledge of life insurance marketing strategies. Moreover, experience in retail and international distribution is also counted.
List of the Banks selected to Manage the IPO.
1. Goldman Sachs Group Inc
2. ICICI Securities Ltd
3. Kotak Mahindra Capital Co
4. JP Morgan Chase & Co
5. JM Financial Ltd.
6. Citigroup Inc
7. Nomura Holdings Inc
8. Axis Capital
9. DSP Merill Lynch
10. SBI Capital Markets
Frequently Asked Question
Q-1 When will the LIC IPO hit the Primary market?
LIC IPO with over 31.6 crore shares or five percent of the government’s stake is likely to hit the D-street in March. There are various discounts over the floor price for its employees and policyholders.
Q-2 What are the benefits for Policyholders?
As per the DRHP filed, the employees and the policyholder of the LIC will be getting a discount over the floor price. The reserve portion planned for them can go up to a maximum of 10 percent of the offered size, and the employee quota will bag 5% of the reservation.
Q-3 Which of the policyholders are eligible for the LIC IPO?
As a policyholder, if you want to invest in the upcoming LIC IPO. In that case, you have to make sure their PAN should be updated on the LIC Portal, and the policyholder must have a Demat account.
If you want to apply for a Demat account, you can apply with a broker or a sub-broker who will guide you.
Q-4 What is the Market Share of LIC?
LIC is one of the leading insurance companies having the maximum share of the life insurance market in India. The government plans to raise as much as $12 billion from selling a stake in the IPO.
LIC is the world’s largest home-market share with over 64.1 percent of the total gross. They also offer the highest return on equity at 82 percent. Moreover, they are the third-largest in terms of life insurance premiums.
Financials of LIC
According to the reports, the profit gained after tax is Rs 1,437 crore for the first half of 2021-22. In the last year, it was around Rs 6.14 crore. The new business premium growth rate is around 554.1 percent in H1 FY22. They compared it to the corresponding year period of the preceding financial year, 394.76 percent.
Embedded Value of LIC IPO
The embedded value of the Upcoming LIC IPO is Rs 5.39 trillion. Also, companies usually trade at around 3-4 times the EV.
Q-5 How much stake is the government selling?
The government has been notified to sell 5 percent of the total capital in shares. So the government will retain a 95 percent stake in the company.
Q-6 How to Link PAN with LIC Policy to Invest in LIC IPO?
To know How to link PAN Card in LIC Policy you can read our complete blog on “how to link PAN with LIC Policy to invest in LIC IPO”
Conclusion – Things to Know Before Investing in LIC IPO
In conclusion, This article covers all the major details you should know before investing in the LIC IPO. This is one of the biggest IPO and most awaited IPO of the year 2022. The company has already filled the DRHP with SEBI and will probably hit the primary market in March 2022.