LIC IPO 2022 | Date | About | Latest Update
The deadline appears to be approaching quickly. The LIC IPO date has been set for May 4, according to recent media sources. The LIC IPO is expected to begin on May 4 and end on May 9. The stories appear to have provided some relief to investors who had been anxiously awaiting the LIC IPO for quite some time. The continuing Russia-Ukraine conflict has caused the LIC IPO date to be postponed, which was originally set for March 31.
The IPO, which is valued at Rs 6 lakh crore, has been eagerly awaited by investors. The government is also expected to reduce the IPO’s size to 3.5 percent in order to generate roughly Rs 21,000 crore. The government had intended to sell a 5% interest in LIC in February. However, because to the continued market instability caused by the Russia-Ukraine conflict, the IPO size has been reduced.
According to the draught papers filed at the time, the government plans to sell a 5% interest in the state-run insurance, or 31.6 crore shares.
Companies with a market capitalization of more than Rs1 lakh crore are required by the Securities and Exchange Board of India (Sebi) to sell 5% of their stock in an initial public offering (IPO).
International actuarial firm Milliman Advisors estimated LIC’s embedded value, which is a measure of the consolidated shareholders equity in an insurance business, to be at Rs 5.4 lakh crore as of September 30, 2021. The market valuation of the government-owned LIC has been set at 1.1 times its embedded value, or Rs 6 lakh crore, based on investor opinion.
LIC IPO: Everything You Need To Know
- LIC IPO Date: The IPO will most likely open for applications on May 4 and close on May 9.
- LIC IPO Price: According to reports from various consultancy firms, the price band may be anywhere around Rs 950-1,000 per equity share. However, no official number has been revealed yet.
- LIC IPO Valuation: The valuation of the company, accoding to actuarial firm Milliman, is expected to be around Rs 5.4 lakh crore. However, according to the government’s intention of selling 3.5 per cent of its stake for Rs 21,000 crore, the valuation comes to be around Rs 6 lakh crore.
- LIC IPO Amount: The government is aiming to sell 3.5 per cent of its stake in the company for Rs 21,000 crore. For this, it will sell 22 crore shares of LIC.
- LIC IPO Date Postponed: The date of the IPO was earlier decided to be before March 31. But it was put on hold due to high market volatility owing to the Russia Ukraine war.
- LIC IPO Details: If the government does not launch the IPO by May 12, they will have to file a fresh LIC IPO DRHP (draft red herring prospectus) with the Securities Exchange Board of India (SEBI). The embedded value may also be affected
The government will raise $21,000 crore through the IPO, in which it will sell a 3.5 percent share in the state-owned Life Insurance Corporation (LIC). The 3.5 percent share sale will bring in significantly less than the 50,000 crore projection made before Russia invaded Ukraine. LIC is valued at Rs. 6 lakh crore in the IPO. According to previous government estimates, the insurer is worth roughly Rs. 17 lakh crore.
Companies with a market capitalization of more than Rs 1 lakh crore must sell 5% of their stock in an IPO, according to Sebi regulations. According to the PTI report, the government has also submitted paperwork with the Sebi requesting an exception from the rule.
Even if the government has reduced the amount of the LIC IPO, it would still be the largest in India, topping One 97 Communications Ltd.’s IPO in November last year, which garnered around 18,300 crore. According to Bloomberg, anchor investors were hesitant to commit as the conflict undermined demand for shares, with foreign funds pulling more than $16 billion from Indian stocks this year.
The government had intended to sell a 5% interest in LIC in February. However, because to the continued market instability caused by the Russia-Ukraine conflict, the IPO size has been reduced. With over 280 million policies, LIC is the largest insurer in India. In 2020, the most recent year for which figures are available, it was the fifth-largest worldwide insurer in terms of insurance premium collection.
The LIC IPO is expected to generate a significant portion of the disinvestment profits projected for this fiscal year. The government expects disinvestment receipts to reach 65,000 crore this fiscal year, up from 13,531 crore the previous year.
LIC IPO: Embedded Value
According to the government’s new estimations, LIC is worth Rs 6 trillion, or barely 1.1 times its previous embedded value of Rs 5.39 trillion. The embedded value, on the other hand, might be altered in the modified IPO filings that the government filed with Sebi on Monday. The LIC IPO will bring in Rs 21,000 crore for the government. The government had planned to float LIC in the previous fiscal year, which ended March 31, but had to postpone the sale because the Russia-Ukraine conflict caused a market meltdown.
Nonetheless, even with the lower amount of Rs 21,000 crore, the LIC IPO would remain the country’s largest initial public offering. Paytm’s IPO, which will raise Rs 18,300 crore in 2021, is the largest so far, followed by Coal India Ltd’s IPO of Rs 15,500 crore in 2010 and Reliance Power’s IPO of Rs 11,700 crore in 2008.
Key Positive Factors
- LIC is a part insurance and part investment products company. Their plans are a combination of insurance and investment with a guaranteed return.
- LIC has over 13.5 lakh agents who play brings most of the new business. LIC plans offer ‘fixed returns’ along with life insurance coverage. This makes it easy to sell by agents and brings peace of mind to the insurers.
- LIC has high trust in the public for both life insurance as well as investment done with them. LIC is synonymous with insurance in India.
- LIC manage asset of Rs 39 lakh crores. That is more money than the entire mutual fund industry combined. They invest these funds across stocks and bonds. They own 4% of all listed stocks in India and more government bonds than the RBI.
- Leading insurance provider company in India and fifth largest global insurer by GWP.
- A range of life insurance products to meet varied insurance needs of individuals
Key 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.
LIC IPO – Perks for Policyholders
LIC has reserved 10% of IPO shares for policyholders, who will also be eligible for a special discount, which will be announced soon.
LIC policyholders can apply under this quota only if:
- The policy is issued on/before 13 Feb 2022
- The PAN is linked to LIC Policy
Important Links for Policyholders
- Check if PAN is linked to your LIC policy
- Link your PAN to existing LIC policy
- How to apply as a policyholder?
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