LIC, it’s past, IPO and the future

The Life Insurance Corporation of India was established on September 1, 1956, following the Life Insurance Corporation Act, 1956 by the Indian Parliament. The company was established with the sole purpose of spreading life insurance throughout the country and providing affordable insurance coverage to all people.

After years of serving the public with insurance and other schemes, the company is now all set to go public and has filed for an Initial Public Offering, which means you have a chance to own a minor stake in the company by buying their shares.

The LIC IPO is a series of disinvestments expected soon, intending to raise Rs.1.75 lakh crore from asset sales to revive the Indian economy.

The LIC IPO will provide institutional investors with the opportunity to invest in India's largest public-sector insurance firm.

Let’s a look at the size of the IPO & other details

Despite the tough competition, LIC is still the largest insurance provider company in India. It has a market share of above 66.2% in new business premium. The company offers participating insurance products and non-participating products like unit-linked insurance products, saving insurance products, term insurance products, health insurance, and annuity as well as pension products.

According to the latest data available, as of 30 Sep 2021, it has a total AUM of Rs. 39 lakh crore. LIC operates through 2048 branches, 113 divisional offices, and 1,554 Satellite Offices. It operates globally in Fiji, Mauritius, Bangladesh, Nepal, Singapore, Sri Lanka, UAE, Bahrain, Qatar, Kuwait, and the United Kingdom.

The share sale could be worth about Rs 65,400 crore at a price band of Rs 2,000-2,100 apiece, going by market rumors.

Details of the IPO

Issue Type: Book Built Issue IPO

Face Value: ?10 per equity share

IPO Price: between Rs 1500 to Rs 3200 per share

Listing At: BSE, NSE

Issue Size: 316,249,885 Eq Shares of ?10

Offer for Sale: 316,249,885 Eq Shares of ?10

Reasons why you should be looking forward to the LIC IPO

Issue size might be around 1 lac crore which is biggest IPO in Indian capital Market HISTORY.

LIC holds its investment in majority of the Indian companies. It boosts a diversified portfolio of holding various companies.?

LIC is one of the oldest state run organization which is more than 6 decade old and still going strong. Finance Minister Nirmala Sitharaman in FY22 budget gave node to LIC’s biggest disinvestment plan as it will help Government to counter it's fiscal deficit.

LIC is a cash rich company with good consumer base. However, its investment choices might be a deciding factor on how it is perceived by the investors.

In the last 20 years, many new players have entered into battlefield like SBI LIFE, HDFC LIFE and ICICIPRU but LIC share drastically still holds grip of 70% of total premium received.

The IPO is not supposed to have a direct effect on LIC policyholders. On the other hand, being listed will improve its accountability and governance and make its processes more effective. As a result, policyholders can profit indirectly from the IPO.?

However.. there could be a few challenges?

* LIC has poor new policy growth as they continue losing market share to private insurance players, especially in urban areas.

* The margin in insurance + investment products is low.

* It's very difficult to value LIC as the business model is unlike any other company.?

* LIC collects money upfront and then promises to compensate policyholders at a later stage. The premiums they collect (part insurance and part investment) cannot be recognized as revenue.

Why does LIC want to go public?

Let’s look at its objective of the IPO

?To achieve the benefits of listing the equity shares on the stock exchange.

?To carry out an offer for sale of 316,249,885 shares by selling shareholders.