In the year 2021 alone, companies raised Rs.1,18,704 crores through 63 IPOs, making it a record-breaking year for IPOs in India. Despite all of this success, a significant portion of investors is excited about one of the most important IPOs in recent history – the LIC India IPO.
LIC India IPO – What makes LIC India IPO Special?
The LIC IPO is expected to be the largest in India’s history. In India, LIC is the leading insurance company, with a market share of 69 percent in FY20.
The LIC collected Rs. 1.78 trillion in first-year premiums in FY20, up 25.17 percent from the previous fiscal year. The Indian government owns the majority of LIC, with a stake of about 95% and a value of Rs. 34 trillion.
Given the current state of the banking sector as a result of the COVID-19 pandemic, such a move was critical in reviving the BFSI sector. The addition of such a well-known company to the BFSI sector will only help the sector attract more investors.
The Indian government intends to sell over 31 crore LIC equity shares, making it the largest IPO launch in history ever.
The LIC India IPO of over 31.6 crore shares, or a 5% government stake, is expected to hit the D-street in mid-April. The initial public offering (IPO), which is predicted to be the largest initial share sale in the country’s history, was originally scheduled to begin in March. However, Russia’s invasion of Ukraine has derailed the plans as stock markets are currently extremely volatile.
LIC India’s Success Story
The 65-year-old insurance behemoth, LIC, has dominated global markets as the fifth largest life insurance company and the tenth-largest in terms of total assets. In terms of revenue, LIC’s revenue increased from Rs. 200 crores in 1956 to Rs. 1000 crore in 1968-70. In 2019-20, the company collected around 2.19 lakh new individual policies, generating Rs. 51227.83 crore in first-year premium income.
LIC currently has 8 zonal offices, 113 divisional offices, 2048 digitally well-equipped branch offices, and 1381 satellite offices located throughout the country. The company also provides policyholders with an online premium collection service through partnerships with various banks and financial institutions.
LIC IPO: Estimated Market Valuation
International actuarial firm Milliman Advisors estimated LIC’s embedded value, which is a measure of the consolidated shareholders’ value in an insurance company, to be around Rs 5.4 lakh crore as of September 30, 2021.
Although the LIC’s market value is not disclosed in the DRHP, it is estimated to be around 3 times the embedded value based on industry standards.
LIC IPO: Largest Ever in Indian Stock Market
The LIC IPO would be the largest ever in Indian stock market history, with a 5% stake dilution, and its market valuation would be comparable to top companies like RIL and TCS once listed.
The amount raised from Paytm’s IPO in 2021 was the largest ever, at Rs 18,300 crore, followed by Coal India (2010), which raised nearly Rs 15,500 crore, and Reliance Power (2008), which raised Rs 11,700 crore.
Reserved Portions in the LIC India IPO
According to the DRHP, the issue is likely to have reservations for eligible employees and LIC policyholders of the company. Domestic mutual funds will receive one-third of the anchor portion.
The government, which owns a 100% stake in the insurance behemoth, would be selling 31,62,49,885 equity shares in the issue. Qualified institutional buyers (QIBs) will receive 50% of the net issue, while non-institutional buyers will receive 15% of the shares. The retail portion of the offer has been set at 35% of the total.
What are the dates for the LIC India IPO?
The LIC IPO date has yet to be announced. The LIC IPO of over 31.6 crore shares, or a 5% government stake, is expected to hit the D-street in mid-April. a
Why is LIC launching an initial public offering (IPO)?
The proceeds from LIC IPO are critical for the government to meet its spending obligations and reduce the budget deficit, which is expected to rise to 9.5 percent of GDP this year.
What is the Policyholder category in the LIC India IPO?
For the LIC IPO, a new category called Policyholder was introduced. Customers who have LIC policies will be eligible for up to 10% of this category’s issue.
What are the requirements for LIC policyholders to apply in the LIC IPO?
This category will be open to policyholders who purchased a LIC policy on or before February 13, 2022. Policyholders who purchased a LIC policy after February 13 will not be eligible for the 10% quota.
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