LIC IPO: The central government is all set to file the draft red herring prospectus (DRHP) of Life Insurance Corporation of India’s (LIC) mega initial public offering (IPO) over the weekend, according to sources. The board. The board of LIC has met today to consider the proposed listing of LIC. Once the board approves the draft red herring prospectus, the Centre will file the papers with the market regulator Sebi. The street is eyeing details including the issue size, OFS, and various investor quotas. The embedded value of LIC was finalized a week ago at over Rs 5 lakh crore.
Established in 1888, LIC has more than 29 crore policy holders. It has a separate quote for them, if the policy is linked to their PAN cards. The company may allot shares at a discounted rate to the policyholders. It has more than Rs 34.3 trillion worth of life funds.
LIC IPO: Portions Reserved for Anchor Investors, Foreign Investor Participation
A portion of the mega LIC IPO will be reserved for the anchor investors. LIC has approached anchor investors to raise about Rs 25,000 crore before the IPO.
To ensure the success of the LIC IPO, the government is in process to rope in foreign investors. The government has been considering a proposal for foreign investors to own as much as 20 per cent in LIC, according to sources. For this, the government is in the process to amend FDI rules so that the investors can pick up the stake without government’s permission under automatic route.
Around 10 per cent of the LIC IPO would be set aside for the LIC poilcyholders. Further, policyholders may get a discount of 5 per cent to issue price in the upcoming IPO.
LIC IPO: Record Number of Demat Accounts Expected
Arijit Malakar, Head of Retail Equity Research, Ashika Group, said: “We are anticipating the momentum in the opening of new retail broking accounts to get a boost on observing the interest that the LIC IPO is generating. 25 crore LIC policyholders and eight crore Demat accounts are currently present in India. With the government’s decision to reserve 10 per cent of the total issue for policyholders, we are expecting some discount to the issue price for policyholders. Most importantly, policyholders will need to update their PAN number on the LIC website and link it to their policy number. There will also be a need to open a Demat account to ensure that LIC shares are credited into their accounts.”
LIC has 8 zonal offices which operate 113 divisional offices and 2,048 branches with 11.48 lakh agents across the country. It generated a surplus of Rs 57,780 crore, of which Rs 2,889 crore (5 per cent) was paid to the government as dividend.
LIC IPO: Why Should you Subscribe?
Angel One has outlined reasons for investors to apply for LIC’s IPO including its highest market share in the country, which stands at 66.18 per cent as of FY 2020-21.
Being a large issue, the chances of allotment are higher. The life insurance industry is growing at 22.5 per cent annually, yielding higher return on investment, said the brokerage firm in its report.
According to the report, the IPO of LIC has enough room for a sharp rise in the number of demat accounts in India as CSDL has more than 50 million demat accounts currently as against about 291.5 million policyholders and agents.
“If we assume 100 per cent of these Demat holders are LIC policyholders, we still have about 24 crore policyholders without any demat account. Hence, the opportunity for new customer acquisition is very high,” it added.
Gurpreet Sidana, Chief Operating Officer, Religare Broking said that the reach, trust and brand loyalty that LIC enjoys amongst its policyholders and general public is phenomenal.
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