The Life Insurance Corporation of India (LIC) is likely to launch its IPO by March end. The biggest life insurance company of India, On Sunday, February 13, 2022, files it's Draft Red Herring Prospectus (DRHP) with the market regulator for a sale of 5 percent equity of the firm via the IPO.
As per reports, through this IPO, the government is likely to raise around ₹70,000 crore which will help the government of India in fulfilling its divestment target for the financial year 2021-22. The government had proposed a divestment target of ₹1.75 lakh crore for FY22 which was later reduced to ₹78,000 crore in the 2022 Budget.
The company's sole promoter is the President of India, acting through the Ministry of Finance.
As per recent reports, the company is valued at ₹14 lakh crore, which will make it the second-largest listed company by market cap. LIC is one of the largest corporations in India, so its IPO launch would be the largest public offering ever in the history of the Indian financial markets.
Let's now learn some key things about the insurance behemoth:
1) About the IPO: The government will sell 31.6 crore shares or 5 percent equity in life insurance through an offer for sale (OFS) in the IPO. No fresh shares will be issued for the public offer. Currently, the government owns a 100 percent stake in the firm, where the total number of shares is around 632 crore.
2) Reservations: As per the DRHP, up to 60 percent of the portion reserved for qualified institutional buyers will be reserved for anchor investors, of which one-third will be reserved for mutual funds. Meanwhile, employees will have up to 5 percent reservation in the issue and policyholders up to 10 percent.
3) Objective: The objective of the offer is to achieve the benefits of listing and carrying out the offer for the sale of up to 31.6 crore shares by the shareholder. The DRHP added that the selling shareholder (President of India acting through the Ministry of Finance, Government of India) will be entitled to the entire proceeds of the offer after deducting the offer expenses and relevant taxes thereon. LIC will not receive any proceeds from the offer.
4) Financials: As per the papers, the company's net worth stands at ₹8,019 crore as of the six months ended September 30, 2021. Its net profit for the same period stood at ₹1,504 crore while total income from policyholders at ₹3.3 lakh crore. The insurer's profit has risen over 13 percent from
₹2,627 crore in FY19 to ₹2,974 crore in FY21. Meanwhile, its revenue from policyholders during the same period is up nearly 23 percent from ₹5.7 lakh crore in FY19 to ₹7 lakh crore in FY21, the prospectus noted.
5) Market share: The firm has a market share of 64.1 percent in gross written premium, 66.2 percent in New Business Premium, 74.6 percent in the number of individual policies issued and 81.1 percent in the number of the group policies issued. Standalone AUM in FY21 stood at ₹36.7 lakh crore vs ₹16.8 lakh crore in FY20.
6) Investment Bankers and Registrar: 10 banks including Kotak Mahindra Capital, Axis Capital, BofA Securities, Citigroup Global Markets India, Nomura Financial Advisory and Securities, Goldman Sachs (India) Securities, ICICI Securities, JM Financial, JP Morgan India and SBI Capital Markets will handle the issue while KFin Technologies is the registrar for the IPO.
7) Holdings: LIC has a 49 percent stake in IDBI Bank, and over 10 percent equity in firms like ITC, L&T, TIL, Grasim, as of the September 2021 quarter. Further, it has between 5 percent to 10 percent stake in M&M, Axis Bank, Tata Steel, RIL, Tata Power, Maruti and Infosys, among others.
8) Peers: There are currently over 20 life insurance companies in India with LIC being the only public sector firm. Apart from LIC, the highest new business premium market share is of SBI Life and HDFC Standard Life at 7 percent, followed by ICICI Prudential at 5 percent, Max Life at 3 percent and Bajaj Allianz at 2 percent and the remaining players have a combined market share of 10 percent.
Meanwhile, in the case of the number of policies, LIC stands at 74 percent followed by SBI Life at 6 percent, HDFC Standard at 4 percent, Max Life and ICICI Prudential at 2 percent each. All the others have a compiled market share of 12 percent under this category.
Net profit for LIC for FY21 stood at ₹2,974 crore. While the same for SBI Life was ₹1,455 crore, HDFC Life was ₹1,360 crore and ICICI Prudential was ₹956 crore.
9) Network: LIC had 1.35 million individuals in its agent network compared to 1.10 million individuals for the entire private life insurance industry as of March 31, 2021. In terms of the number of policies, each LIC agent sold 15.3 in FY2021 versus 3.9, 1.3 and 0.9 policies sold by SBI Life, HDFC Life and ICICI Prudential, respectively, in FY21.
10) About the firm: Since its incorporation in 1956, LIC has been selling and soliciting life insurance and is the largest life insurer in India. It has a wide variety of product offerings of life insurance plans, endowment plans, whole life plans, moneyback plans, term insurance plans and insurance riders. It also has 2 subsidiaries and 4 associate companies which look after the pension fund, housing finance, banking, mutual funds and cards business.