LIC IPO coming soon: Could become the biggest listed company in India
Life Insurance Corporation of India (LIC) is India's largest insurance firm and it has filed for Initial Public Offering. IPO is expected to come on March 11, according to media reports. The offer will constitute a 4.99% stake sale by the company. It will be India's largest IPO to date as LIC plans to offload 316.25 million shares. Here is all you need to know about the issue.
LIC IPO: Key numbers from the DHRP
- LIC was recognized as the third strongest and 10th most valuable global insurance brand as per the “Insurance 100 2021 report” released by Brand Finance.
- LIC is the largest life insurer in India with a market share of 64.1% in terms of premium. In terms of new business premium and number of individual policies issued, the market share is 66.2% and 74.6%, respectively. In terms of the number of individual agents, LIC was 55% of all individual agents in India.
- It has the largest asset under management in the country. As of 30 September 2021, it has Rs 39.6 lakh crore of assets under management. As of 31 March 2021, its AUM is 3.3 times higher than the total AUM of all private life insurers in India.
- As per the CRISIL Report, as of September 30, 2021, LIC investments in listed equity represented around 4% of the total market capitalization of NSE as of that date.
- The embedded value of LIC as of September 30, 2021, stood at Rs 5.4 lakh crore.
- LIC has 2,048 Branch offices, eight zonal offices, 113 divisional offices.
LIC Issue details
- The IPO will have only Offer for Sale (OFS), there will be no Fresh Issue.
- LIC will offload 316.25 million shares which are about 5% of its total equity, the total number of equity shares is 6.32 billion.
- LIC’s IPO may have a 50-60% reservation for Qualified Institutional Buyers (QIB), not less than 15% portion of the IPO will be reserved for Non-Institutional Investors (NII). This will leave 35% of the public issue reserved for retail investors.
- There will be reservations for the employees and policyholders. The aggregate of reservations for eligible policyholders will not be more than 10% of the offer size. The employee quota will be 5%.
- Both policyholders and employees will get discounts in the IPO.
- The valuation of LIC IPO will be around three to five times the embedded value. The valuation of the mega LIC IPO could be around Rs 15 lakh crore.
The listed peers of LIC include SBI Life Insurance Company, HDFC Life Insurance Company, and ICICI Prudential Life Insurance Company.
- Among its peers, LIC is the biggest in terms of net profit for FY21 with Rs 2,974.14 crore profit. The next on the list is SBI Life with a net profit of Rs 1,455.85 crore.
- The Earning Per Share (basic) is highest for SBI Life at 14.56 followed by HDFC Life at 6.74. LIC is last on the list.
- RoNW is highest for LIC with 45.65% followed by HDFC Life with RoNW of 15.75%.
- The Net Profit for FY19, FY20 & FY21 was Rs 2627 cr, Rs 2710 cr & Rs 2974 cr respectively.
- The net profit on sale/redemption of policyholders’ investments (profit on sale/redemption of investments minus loss on sale/redemption of investments) was Rs 23,897.21 crore, Rs 19387.48 crore, Rs 39809.61 crore, and Rs 23246.53 crore in FY19, FY20, FY21 and the six months ended September 30, 2021, on a consolidated basis, respectively.
- Gross Written Premium (GWP) increased at a CAGR of 9.21% on a consolidated basis between FY19 and FY21.
- The New Business Profit (NBP) increased at a CAGR of 13.49% on the consolidated basis between FY19 and FY21.
- LIC's expense ratios on a standalone basis are lower than that of the top five private players in India as a whole.
- For FY19, FY20, FY21, and September 30, 2021, the Corporation’s operating expenses as a percentage of the total premium (Operating Expense Ratio) on a standalone basis was 8.4%, 9.0%, 8.7%, and 10.1% respectively, compared to the median of the top five private players’ Operating Expense Ratio of 13.0%, 13.0%, 11.9%, and 11.9%, respectively.
LIC Market Share
Where does LIC invest money?
As of September 30, 2021, on a standalone basis, its policyholders’ investment portfolio included
- 37.50% central government securities
- 24.78% equity securities
- 24.61% state government securities and 8.07% corporate bonds
As of September 30, 2021, 95.89% of the Corporation’s debt AUM on a standalone basis was invested in sovereign and AAA-rated securities. Over 90% of the Corporation’s policyholders’ equity investments on a standalone basis are held in stocks that are a part of the Nifty 200 and BSE 200 indices as of September 30, 2021.
- Fifty largest life insurer company globally by GWP and the largest player in the fast-growing and underpenetrated Indian Life Insurance Sector.
- Trusted brand and a customer-centric business model.
- A cross-cyclical product mix that caters to diverse consumer needs and an individual product portfolio that is dominated by participating life insurance policies.
- Presence across India through an omnichannel distribution network with an unparalleled agency force.
LIC Growth Potential
- Capitalize on the growth opportunities in the Indian life insurance sector.
- Diversify its product mix by increasing the contribution of the non-participating portfolio.
- Reinforce their omnichannel distribution network and increase its productivity.
- Continue leveraging technology to aid growth, drive operating efficiencies and provide digital support.
- Adverse persistency metrics or an adverse variation in persistency metrics could have a material adverse effect on its financial condition.
- If actual claims experienced and other parameters are different from the assumptions used in pricing LIC products and setting reserves for their products, it could affect its business.
- Interest rate fluctuations may materially and adversely affect LIC's profitability.
How to apply for LIC IPO?
If you are an existing policyholder, you need to do the following to get discount while applying for IPO:
- Link your PAN card to your LIC policy account. Visit this link to add your PAN.
- Get a DEMAT account
You can apply for LIC on the INDmoney app. Download the app from AppStore and PlayStore and apply using the app.
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