LIC IPO Complete Details | Should you Invest in LIC IPO?

Almost everybody – from investors to policyholders was waiting for LIC IPO in-depth details. Finally, the wait is over as LIC has filed a DRHP i.e., draft red herring prospectus with SEBI on Sunday, February 13. Now, the government-owned company is all set to raise funds by its initial public offerings. Let’s check out all about LIC IPO – it’s issue price, lead managers, investments, revenue, earnings and much more

From investors to policyholders almost everyone was waiting for the detailed details of LIC’s IPO. Finally, the wait is over as LIC has filed a DRHP i.e. Draft Red Herring Prospectus with SEBI on Sunday, February 13. Now, the state-owned company is set to raise funds through its initial public offerings. Let’s look at all about LIC IPO – it’s issue price, lead manager, investments, revenue, earnings, and more. Here are the top highlights of LIC’s draft papers:

What is the Issue Price?

As per the DRHP, the LIC IPO is 100% OFS (Offer for sale) by the Government of India and there is no fresh issue of shares by LIC. About 31.6 cr shares are on offer representing a 5% equity stake of the government of India. 

As per DRHP, LIC IPO is 100% OFS (Offer for Sale) by the Government of India and there is no fresh issue of shares by LIC. Around 31.6 crore shares representing a 5% equity stake of the Government of India are on offer.

Who are the Current Promoters?

LIC’s current promoter is the President of India, acting through the Ministry of Finance, Government of India. The promoter currently holds 100 per cent of the pre-offer paid-up equity share capital of the Corporation.

The current promoter of LIC is the President of India, who functions through the Ministry of Finance, Government of India. Presently the promoter holds 100 per cent of the pre-offer paid-up equity share capital of the Corporation.

Who are the Lead Managers?

The government has appointed 10 merchant bankers, including Kotak Mahindra Capital, Goldman Sachs (India) Securities Pvt Ltd, Citigroup Global Markets India Pvt Ltd., JP Morgan India, Axis Capital, Bofa Securities, ICICI Securities, JM Financial, SBI Capital and Nomura Financial Advisory and Securities (India) Pvt Ltd, to manage the mega IPO of the country’s largest insurer.

The government has appointed 10 merchant bankers including Kotak Mahindra Capital, Goldman Sachs (India) Securities Pvt Ltd, Citigroup Global Markets India Pvt Ltd, JP Morgan India, Axis Capital, BofA Securities, ICICI Securities, JM Financial, SBI Capital, and Nomura. Financial Advisor and Securities (India) Pvt Ltd, to manage the Mega IPO of the country’s largest insurer.

A Business Background of LIC

  • The firm has been providing life insurance in India for more than 65 years and is the largest life insurer in India.
  • LIC has a 66% market share in New Business Premiums, and a 74.6% market share in terms of number of individual policies issued with 283 mn policies and 1.35 mn agents as of 31st March 21.
  • The embedded value of LIC as on 30th Sep 21 is Rs 5,39,686 cr (about INR 5.4 trillion)
  • LIC is ranked fifth globally by life insurance GWP and 10th globally in terms of total assets.
  • The company has 8 Zonal offices in Delhi, Mumbai, Kolkata, Chennai, Kanpur, Patna, Bhopal, and Hyderabad. As of 30 Sep 2021, the firm operates through 2048 branches, 113 divisional offices, and 1,554 Satellite offices. It operates globally in Bangladesh, Bahrain, Nepal, Sri Lanka, Singapore, Fiji, Kuwait, Qatar, Mauritius, UAE, and the United Kingdom. As of March 31, 2021, it has the largest agent network of 1.35 million life insurance agents.

What are the Employee and Policyholder Reservations?

Well, the employee reservation portion will not exceed 5 per cent of the post-offer equity share capital, while the policyholder reservation portion will not exceed 10 per cent of the offered size. 

Well, the employee reservation share will not exceed 5 per cent of the post-offer equity share capital, while the policyholder reservation share will not exceed 10 per cent of the offered size.

Eligible policyholders may get a discount to the offer price and it will be announced at least two working days prior to the bid/ offer opening date, it said. Up to 60 per cent of the QIB portion will be allocated to anchor investors, while one-third of the anchor investor portion will be reserved for domestic mutual funds.

Eligible policyholders can get a discount on the offer price and the same will be announced at least two working days before the date of opening of the bid/offer. Up to 60 per cent of the QIB portion will be allocated to anchor investors, while one-third of the anchor investor share will be reserved for domestic mutual funds.

What is the Total Market Value of LIC?

As of 30 September 2021, LIC is the largest asset manager in India and the total market value i.e. Assets Under Management of LIC is Rs 39.56 trillion on a standalone basis. Now, this is 3.3 times the total AUM of all private life insurers in India.

Let’s look into the Investments by LIC

  • As of September 2021. 37.45% or Rs 14.81 trillion is invested in central government securities. In FY21, this investment was at 37.83% or Rs 13.91 trillion while in FY20 it was at Rs 11.93 trillion or 38.80% of its total AUM.
  • Around 24.77% of AUM or Rs 9.80 trillion invested in equities as of September while in FY21 total equity investment worth Rs 7.97 trillion or 21.67% of its total AUM.
  • In FY20, around 15.02% of total AUM or around Rs 4.62 trillion invested inequities. State government securities investment was around Rs 9.74 trillion or 24.62% of the total AUM as of September. In FY21 and FY20 this share was around 26.16% and 29.37% or Rs 9.62 trillion and Rs 9.03 trillion, respectively.

A Dig into the LIC Earnings: 

For FY21, LIC’s total revenue was at Rs 3805.76 crore against Rs 30198.22 crore last year. Net profit for the fiscal stood at Rs 191.31 crore against a loss of Rs 11763.38 crore a year ago. The total net worth for the fiscal was at Rs 189.01 crore versus Rs 131.90 crore a year ago.

LIC’s listing is crucial for the government to meet its lowered revenue estimates of divestment of Rs 78,000 crore for the current fiscal. The government has so far raised about Rs 12,000 crore from the privatization of Air India and stake sale in other PSUs.

LIC is expected to enter the stock markets in March 2022. Would you be investing?

Leave a Comment