LIC IPO coming soon, everything that is known so far!

LIC IPO
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The Government of India is looking to divest its take in LIC and hence will be coming up with its IPO in the coming months. Here are some details:

About LIC: 

  • Life Insurance Company of India (LIC) is the oldest and largest 100% Government of India owned insurance company formed by the LIC Act 1956. 
  • LIC has an asset-value of over Rs 37 lakh crore as at the end of FY21.
  • LIC has its presence all over India with its corporate office headquartered in Mumbai. As of 31st March 2021, LIC has 8 Zonal Offices, 113 Divisional Offices, 74 Customer Zones, 2048 Branch Offices, 1546 Satellite Offices. 
  •  It has more than 42000 Premium Points and Life Plus Offices.  Over one lakh employees, 13.53 Lakh agents are associated with the company.
  • Moreover, it has tied up with 8 PSU Banks, 6 private banks, 13 regional rural banks, 41 cooperative banks and 1 foreign bank.  
  • LIC also has international presence through its branches/joint venture companies/wholly-owned subsidiary and is present in 14 countries including places like Singapore, Kenya, Sri Lanka, Nepal, Bangladesh, Fiji, Kuwait, Mauritius, Oman, Qatar, UAE, UK, and Bahrain.
  • The product mix of LIC includes conventional insurance plans along with unit plans, special plans, pension plans, micro insurance plans, and health plans. 

LIC Financials:

  • LIC holds a giant's share in the insurance industry with 66.24% market share in terms of total first-year premium (premium collected from new business in a financial year excluding single premium) and 74.71% in terms of the number of policies.
  • The Gross NPA of LIC has been on the rise and stands at 6% as of 31st March 2021. However, considering the huge asset size, there is not much to worry as LIC has made considerable provisions for the bad loans.

Key Ratios of LIC (as of FY19):

  • The solvency ratio of LIC stands at 160% which is little above the required solvency ratio of 150% as stipulated by the Insurance Regulatory and Development Authority (IRDAI).
  • The LIC persistency ratio indicating a pool of satisfied customers in terms of the number of policies and in terms of annualized premium ranges between 50-60% and 60-77% respectively.
  • The claim settlement ratio of LIC is the highest of all insurers and stands at 98%.

LIC IPO Date

The LIC IPO date has not been announced as of yet. That said, according to the government of India, the LIC IPO is slated to open up for subscription sometime during the second half of FY22. Unfortunately, the upcoming LIC IPO had to witness several roadblocks in the form of the COVID-19 pandemic.

However, with the recent appointment of Edelweiss Financial Services Limited and Deloitte as pre-IPO advisors, the process has started to pick up some speed. If all the parties involved work in tandem and at full speed to get the requisite approvals from the regulators and finalize the LIC IPO, we might just see the shares of the insurance company listed on the bourses before the end of this financial year.     

LIC IPO Size

The government of India is likely to dilute not more than 10% of its entire stake in LIC. According to the estimates made by various analysts, the size of the upcoming LIC IPO would range somewhere between Rs. 70,000 crores to Rs. 1 lakh crores. However, the Finance Ministry, during the budget presentation, stated that the government was expecting to raise up to Rs. 90,000 crores through the stake sale of LIC and IDBI Bank. Under such circumstances, the LIC IPO size may not touch the magical Rs. 1 lakh crores and would perhaps be restricted to somewhere between Rs. 70,000 crores and Rs. 80,000 crores. That said, the official estimate of the LIC IPO size still remains to be announced.   

LIC IPO Price

Since the draft red herring prospectus (DRHP) has not been filed yet, the LIC IPO price band is not yet known. Also, the official share valuation figures need to be estimated before fixing the LIC IPO share price band. And so, as of now, the LIC IPO share price still remains shrouded in mystery. But the issue price is generally announced around a week before the shares are open for subscription by the public.

LIC IPO Valuation

According to media reports, the government seems to have estimated the valuation of Life Insurance Corporation (LIC) at around Rs 13-15 lakh crore. Earlier this year, Chief Economic Adviser KV Subramanian had  indicated that the government may easily mobilise Rs 90,000 crore by divesting 6-7 per cent stake in the state-owned insurance giant. However, most market analysts and experts seem to put the figures somewhere around Rs. 8 lakh crores to Rs. 11.5 lakh crores. Again, investors would have to wait for the official figures to be released to get to know the real LIC IPO valuation.

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