Last Updated on Jun 14, 2022 by Vyshakh
Much to everyone’s excitement, the LIC IPO is finally here! At a size of ~Rs 20,000 cr., the IPO is the biggest in the country so far. Below we have discussed everything you need to know about LIC and the IPO to make a sound investment decision.
This article covers:
- LIC IPO highlights
- Category-wise reservation of the IPO
- LIC IPO important dates
- About Life Insurance Corporation of India
- Highlights of LIC
- Objects of the offer
- LIC IPO policyholder and employees special discount
- Financial performance of LIC
- Peer comparison
- Life Insurance Corporation SWOT Analysis
- LIC prospects
- FAQs about LIC IPO
Table of Contents
About LIC IPO
| Issue size | Rs 20,000 – 21,000 cr |
| Open date | 4 May 2022 |
| Close date | 9 May 2022 |
| Issue type | Book built issue |
| Face value | Rs 10 per equity share |
| IPO price | Rs 902 to Rs 949 per equity share |
| Market lot | 15 shares |
| Minimum order quantity | 1 lot |
| Minimum investment | ~Rs 13,530 |
| Maximum order quantity | 14 lots |
| Maximum investment | ~Rs 1,99,290 |
| Listing at | BSE and NSE |
Here are important details about LIC IPO details in 7 crisp points:
- Size: The government aims to raise Rs 21,008 cr. from the offer.
- Dates: The issue opens on 4 May 2022 and closes on 9 May 2022.
- Price: The price band is fixed at Rs 902 to Rs 949 per share.
- Discount: The government has announced a discount of Rs 60 per share to policyholders and Rs 45 for employees.
- Lot size: Each lot has 15 shares and an applicant can bid for a maximum of 14 lot.
- Listing: The shares will be listed on both NSE and BSE and the tentative date is 17 May 2022.
- Registrar: KFin Technologies Ltd is the official registrar of the LIC
Category-wise reservation of the IPO
The government has earmarked 10% of the issue for policyholders. A significant part is reserved for the employees of Life Insurance Corporation. Half of the remaining IPO issue is earmarked for qualified institutional buyers (QIBs), of which 60% has been set aside for anchor investors on a discretionary basis. 1/3 of the issue is reserved for the anchor investor and will be earmarked for domestic mutual funds. Finally, 15% will be allocated to non-institutional investors (NII) ~35% will be available to retail investors.
LIC IPO important dates
| Open date | 4 May 2022 |
| Close date | 9 May 2022 |
| UPI mandate expiry date | 10 May 2022 |
| Allotment date | 12 May 2022 |
| Initiation of refunds | 13 May 2022 |
| Credit of shares toDemat account | 16 May 2022 |
| IPO listing date | 17 May 2022 |
About Life Insurance Corporation of India
True to its tagline – Zindagi ke saath bhi… Zindagi ke baad bhi…, LIC is India’s largest insurer and is government-run. It offers participating and non-participating insurance products, including saving insurance, term insurance, health insurance, unit-linked insurance products (ULIPs), and annuity and pension products.
Highlights of LIC
- It claims a market share of over 66.2% in new business premium.
- It boasts a market share of over 64.1% in terms of premiums.
- It has a total AUM of Rs 3,95,58,929.24 mn as of 30 September 2021.
Objects of the offer
- To offload a 3.5% stake in LIC for Rs 21,000 cr.
- To enjoy the benefits of listing.
- Carry out the Offer For Sale (OFS) by the selling shareholder – President of India, acting via the Ministry of Finance, Government of India.
- Enhance the company’s visibility and brand image.
- Provide a public market for its equity shares in India.
LIC IPO policyholder and employees special discount
The government of India has announced a discount for LIC policyholders and employees. As a policyholder, you can avail a discount of Rs 60 per equity share. However, only the policyholders who bought their policy on or before 13 April 2022 are eligible for this discount. Further, the company’s employees are eligible for a discount of Rs 45 per equity share.
Financial performance of LIC
- LIC’s net premium income increased at a 9.30% CAGR from Rs 3,37,18,539.65 lakh in 2019 to Rs 4,02,84,434.43 lakh in 2021.
- Its total revenue rose from Rs 5,60,78,439.38 lakh in FY 2019 to Rs 6,82,20,499.40 lakh in FY 2021.
- The company’s profit after tax increased at a CAGR of 3.87% from Rs 2,68,849.66 lakh in FY 2019 to Rs 2,90,056.68 lakh in FY 2021.
- LIC’s 13-month persistency ratio increased from 66% in FY 2019 to 67% in FY 2021 thereby suggesting growth in the policyholders who renewed their policies.
- As of December 2021, the insurer’s market share for the New Business Premium segment stood at ~66%, significantly higher than the combined market share of its rivals.
- LIC commands a market share of 74% in terms of the number of policies.
- LIC clocked a 25% y-o-y growth in total APE (Annual Premium Equivalent).
Below is a table of LIC’s consolidated financials from FY 2019 to FY 2021.
| Particulars | FY 2019 (Rs) | FY 2020 (Rs) | FY 2021 (Rs) |
| Net premium income | 3,37,18,539.65 | 3,79,06,255.71 | 4,02,84,434.43 |
| Total revenue | 5,60,78,439.38 | 6,15,88,293.71 | 6,82,20,499.4 |
| Profit after tax | 2,68,849.66 | 2,71,270.8 | 2,90,056.68 |
| Persistency ratio (13th month) | 66% | 61% | 67% |
| Conservation ratio | 92.19 % | 88.79 % | 84.48 % |
| Solvency ratio | 1.6 | 1.55 | 1.76 |
Peer comparison
In addition to LIC, India’s insurance sector also has private players. Below is a table detailing LIC’s peers and their market cap.
| Competitor | Market capitalisation (Rs in cr.) |
| HDFC Life Insurance | 1,20,715.06 |
| SBI Life Insurance | 1,11,726.39 |
| ICICI Prudential Life Insurance | 76,788.32 |
*Data as of 29 April 2022
LIC SWOT Analysis
The issue is expected to assist the government in meeting its revised disinvestment target of Rs 78,000 cr for the fiscal while tapping into a legion of new retail investors. Here’s a SWOT analysis of LIC to help you gain clarity for your investment decision.
Strengths
- A leading insurance provider in India with a lineage of 65 years and the world’s fifth-largest insurer by gross written premium (GWP).
- A variety of life insurance plans to accommodate people’s varying insurance needs.
- Strong omni channel presence through 1.34 mn. individual agents, 3,463 active micro insurance agents, 174 other channels, and others.
- LIC is the largest asset manager in India, with a proven track record of financial performance.
- Trusted brand and a customer-centric business model.
- Robust risk management framework.
- Management team with extensive experience and qualifications and strong corporate governance framework.
Risks
- In the first nine months of FY 2022, the number of death claims settled increased as compared to FY 2019 due to COVID-19 pandemic.
- The business is dependent on individual agents, which leads to continuous recruiting and retaining. If the company fails to do so, it can severely impact the business growth.
- Division of the single consolidated ‘Life Fund’ of the Corporation into two separate funds, viz., a participating policyholders’ fund and a non-participating policyholders’ fund, effective 30 September 2021 may adversely affect the business, its financial condition, results of operations and cash flows.
- Lockdown has affected the ability of LIC partners to sell products.
- A highly competitive industry.
Opportunities
- The company has the ability to expand its product portfolio and introduce new products that cater to the needs of the customers.
- LIC can improve the business to a greater scale and make a high return by implementing the latest technology such as blockchain and artificial intelligence.
- The company can invest in new-age companies and benefit from them in terms of gaining new-age customers and technological advancements.
Threats
- LIC agents are independent and can easily miss-sell the products, hampering the brand image.
- Even after being the leading insurer in the country, the company faces intense competition from private life insurers like HDFC Life and ICICI Prudential Life.
- Government intrusion in primary business areas could affect decision making and effective resource utilisation.
- The Government has put a limit on foreign investments in Indian insurance companies. It can directly impact the LIC’s market share.
LIC prospects
Given LIC’s size, reach, and scalability, it is well-equipped to seize the growth opportunities In the Indian life insurance sector. Following are the prospects of LIC.
- It looks to increase the market share of its bank assurance segment by partnering with more banks.
- It wants to enhance the share of non-participating products by increasing by focusing on protection products, pension/annuity products, ULIP, and health insurance.
- Upsell and cross-sell its products to customers and beneficiaries to cater to their varied financial needs.
- Hire more millennial agents to accommodate the changing demographic dynamics.
- Increase the average ticket size of its products and focus on group protection plans.
- Life Insurance Corporation also plans to improvise its distribution channels. Not only does it want to expand its individual agency network, but also to improve their productivity and longevity.
- LIC intends to identify additional partners in the bank assurance and alternate channels, including brokers, insurance marketing firms, and other agents.
- Life Insurance Corporation looks to bank upon the latest technology and digital initiatives in bettering its operations and services.
FAQs about LIC IPO
Who is the promoter of LIC?
Currently, the Government of India holds a 100% stake in LIC, the largest insurer. The government will reserve a 10% stake for its policyholders, 50% for qualified institutional buyers (QIBs), 35% for retail buyers, and 15% for non-institutional investors. Of the 50% QIB allocation, 60% will be reserved for anchor investors.
What is the expected market cap of LIC?
The market capitalisation of LIC would be Rs 13-15 lakh bn following the IPO.
Is it mandatory for policyholders to have a Demat account to apply for shares in the offer?
Yes. If the shares are allotted, they are transferred to the investor’s Demat account as physical share certificates are no longer used. Hence, to own the shares, a policyholder will need a Demat account to apply for the IPO.
What is the lock-in period for the shares purchased through the policyholder reservation portion?
There is no lock-in period. As a result, if a policyholder chooses to sell its shares, it can do so immediately on listing.
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