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In the recently concluded Budget 2021-22, the Finance Minister reaffirmed the news about the completion of the LIC IPO in 2021-22. 

With this move, the government intends to induce discipline in the public sector insurance firm and offer an opportunity for investors to generate wealth.

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Here are some details about the upcoming LIC IPO 2021.

Latest Developments Around the LIC IPO

While Finance Minister Nirmala Sitharaman had proposed selling a part of its holdings in LIC by the way of an IPO in last year’s budget itself, this year, the government intends to see it through. 

With a target of raising Rs.1.75 lakh crore from asset sales to revive the Indian economy, the LIC IPO is one in the series of disinvestments planned in the near future.

The Department of Investment and Public Asset Management (DIPAM) which deals with all matters pertaining to the Central Government’s investments and disinvestments will be looking after the LIC IPO too. 

On February 02, 2021, DIPAM Secretary Tuhin Kanta Pandey confirmed that investors can expect the LIC IPO to be launched post-October 2021.

Further, DIPAM has enrolled the services of the actuarial firm Milliman Advisors to determine the value of LIC before launching the IPO.

 Also, SBI Caps and Deloitte have been appointed as pre-IPO advisors.

 The Secretary also said that they are planning to offer up to 10 percent of the shares to existing policyholders.

 This will give them an opportunity to become shareholders and participate in the company’s growth.

Tentative Timelines

With an actuarial firm already appointed and the introduction of around 27 amendments to the Life Insurance Corporation Act, 1956, the LIC IPO is likely to be launched during the third or fourth quarter of the financial year 2021-22.

About LIC India

The Life Insurance Corporation of India (LIC) was created on September 01, 1956, after the Parliament of India passed the Life Insurance Corporation Act, 1956. It was created with the sole purpose of spreading life insurance across the country and providing insurance cover to every citizen at an affordable cost.  

The company offers the following life insurance plans:

1. Endowment Plans

  • New Endowment Plan 
  • New Jeevan Anand
  • New Bima Bachat
  • Single Premium Endowment Plan
  • Jeevan Lakshya
  • Jeevan Labh
  • Aadhaar Stambh
  • Aadhaar Shila

2. Whole Life Plans

  • Jeevan Umang

3. Money Back Plans

  • New Money Back Plan – 20 Years
  • New Money Back Plan – 25 Years
  • Jeevan Umang
  • New Children’s Money Back Plan
  • Jeevan Tarun
  • Jeevan Shiromani
  • Bima Shree

4. Term Assurance Plans

  • Tech Term
  • Jeevan Amar

5. Riders

  • Linked Accidental Death Benefit Rider
  • Accidental Death and Disability Benefit Rider
  • Accidental Benefit Rider
  • Premium Waiver Benefit Rider
  • New Critical Illness Benefit Rider
  • New Term Assurance Rider

LIC – Business Objectives 

LIC has the following business objectives:

  • Spreading life insurance across the country especially to the socially and economically backward classes.
  • Mobilize people’s savings by making insurance-linked savings attractive to them.
  • Deploying the funds to the best advantage of the investors as well as the community as a whole, keeping in view national priorities and obligations of attractive return.
  • Conducting business by being mindful of the fact that the funds belong to the policyholders.

Growth Story of LIC India

In 1956, the LIC had 5 Zonal Offices, 33 Divisional Offices, and 212 Branch offices.

Today, it functions with 8 Zonal Offices, 113 Divisional Offices, 2048 fully-computerized Branch Offices, and 1381 Satellite Offices across the country.

The company has also tied up with various banks and service providers to offer on-line premium collection facilities to policyholders.

Further, it offers ECS and ATM-payment facilities, online kiosks, IVRs, and info centers in select cities to boost customer convenience. The satellite offices are smaller and closer to the customers.

On the business performance front, LIC India grew from about Rs.200 crore of new business in 1957 to around Rs.1000 crore by 1969-70. A decade later, the new business contribution increased to Rs.2000 crore.

By 1985-86, the sum assured on new policies had increased to Rs.7000 crore. With computers entering regular people’s lives in the 1990s, the company introduced online service to agents and policyholders.

In 2019-20, the company procured around 2.19 lakh new individual policies with a first-year premium income of Rs.51227.83 crore.

LIC Analysis – Industry View

In 2019-20, the Indian Life Insurance industry recorded a premium income of Rs.5.73 lakh crore – a growth of around 12.75 percent over that recorded in 2018-19. LIC India recorded a growth of around 12.41 percent over 2018-19. 

 LIC had a market share of around 66.42 percent in 2018-19, it marginally reduced to 66.22 percent in 2019-20. 

As compared to private players, single-premium products played a bigger role for LIC contributing around 31.7 percent of its total premium income.

Compared to 2018-29, the first-year premium collection of industry increased by around 39.71 percent in 2019-20. LIC experienced phenomenal growth in the first-year premium collection of 85.02 percent over the last year.

At the end of March 2020, there were 68 insurers operating in India. Of these, 24 were life insurers, 27 were general insurers, 6 were standalone health insurers, and 11 were re-insurers including foreign reinsurers branches and Lloyd’s India.

1. Strengths of LIC India

Compared to its peers, LIC has the following strengths:

  • The Life Insurance Corporation of India has a pan-India presence with 8 Zonal Offices, 113 Divisional Offices, 2048 fully-computerized Branch Offices, and 1381 Satellite Offices across the country. Further, it offers ECS and ATM-payment facilities, online kiosks, IVRs, and info centers in select cities to boost customer convenience.
  • LIC India is a trusted name in India. It regularly features in the list of the top 20 most trusted brands in the country.
  • It is also the largest investor in India with assets under management worth around Rs.15 lakh crore.
  • LIC has over 1,14,000 employees and more than 11 lakh agents. The company has also tied up with various banks and service providers to offer on-line premium collection facilities to policyholders

2. Opportunity to Investors

The LIC IPO will give retail investors an opportunity to be a part of the largest public sector insurance company in India. Once the price details are released, the valuation of the IPO can be compared with the industry benchmark and intrinsic value of the company.

3. Threats or Risk Factors 

  • It faces competition from many private players offering better service to policyholders.
  • Since it is a public sector enterprise, any change in the government can impact its policies. LIC also needs to change its internal policies based on any fiscal/monetary policy changes in the country.

Key Takeaways 

  • LIC is one of the largest state-owned life insurance companies in India and the largest investor too. 
  • Being a PSU, there are certain restrictions on LIC.
  • While the details are yet to be finalized, existing policyholders might get a 10 percent special allocation in the IPO.

FAQs

Q1. What is the LIC IPO?

The Government of India has decided to reduce its holding in LIC by launching a public issue in 2021. This is expected to make the operations of LIC more transparent and efficient. More details will be updated once the company files the Red Herring Prospectus with SEBI.

Q2. What are the expected dates of the LIC IPO?

According to DIPAM, the Life Insurance Corporation of India (LIC) IPO can be expected during the third or fourth quarters of the financial year 2021-22. The pre-IPO process is already underway.

Q3. What will the effects of the LIC IPO on existing policyholders?

LIC’s policyholders are not expected to be directly impacted by the IPO. However, being listed can boost its transparency and governance, and make its processes more efficient. Hence, policyholders might indirectly benefit from the IPO. Further, the Secretary of DIPAM has said that existing policyholders might get a reserved quota in the offer.

The Government of India will ensure that the sovereign guarantee that made LIC popular is maintained. However, since the government is also making changes to the Life Insurance Corporation Act, 1956, we will have to wait to see the changes to assess the impact on policyholders.

We will keep updating this space as more announcements around the LIC IPO are made.

Happy Investing!

Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.

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