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Things We Need To Know Before Investing in LIC IPO

03 December 2021
3 minutes

The government revealed plans to launch an initial public offering (IPO) of Life Insurance Corporation of India (LIC) in its 2020 budget.. 

The purpose of this IPO is  to ensure more discipline, transparency in the company’s operations and give retail investors a chance to invest in the company. 

A public offering does not signify LIC’s privatization as privatization and listing  are different things. The government plans to sell a part of its stake through this IPO. Here are some important details about the IPO: 

What is the LIC IPO? 

LIC has always been a government-controlled entity. An IPO occurs when a company decides to go public i.e. list on the stock exchange. 

Here are few things you should know about before investing in LIC IPO shares: 

Ms. Nirmala Sitharaman, India’s finance minister, first announced the disinvestment of equity in LIC in the Union Budget 2020. 

An amendment has been made in the LIC Act,1956 to facilitate the roll-out of IPO. The amendment indicates that LIC will become a listed company and prepare quarterly earnings reports and balance sheets. Moreover, any developments within the company will have to be made public post the IPO. 

LIC has asked its policyholders to update their Permanent Account Number (PAN) and make sure that they have valid DEMAT accounts so that they can participate in the proposed public offer. 

Global investors including BlackRock and Blackstone have reportedly shown interest in the anchor issue of the proposed IPO.

Mr. Arijit Basu, the former MD of State Bank of India and the former MD and CEO of SBI Life Insurance, has been recruited as a consultant to help with the launch. Deloitte and SBI Capital are among the pre-IPO advisors. 

Whereas Milliman Advisor LLP India, an actuarial firm, is in charge of calculating the embedded value of the company. 

KFintech, a Hyderabad based company, has been appointed as registrar and share transfer agent. Meanwhile, Mumbai-based Concept Communications has been chosen as the advertising agency. 

Currently, the total valuation of the public offering is estimated to be around Rs. 70,000 to Rs 1 lakh crore. However, we still don’t know about the LIC IPO share price range. 

Out of a total of 18 banks, both domestic and international, only 10 were selected to manage the IPO.  

They were chosen based on their knowledge of life insurance, marketing strategies, and their experience in retail and international distribution. 

Below is a list of some of the banks that were  shortlisted as book-running lead managers or BRLMs for the IPO: 

  1. Goldman Sachs Group Inc
  2. ICICI Securities Ltd
  3. Kotak Mahindra Capital Co
  4. JP Morgan Chase & Co
  5. JM Financial Ltd. 
  6. Citigroup Inc 
  7. Nomura Holdings Inc 
  8. Axis Capital 
  9. DSP Merill Lynch 
  10. SBI Capital Markets

 

Currently, the allocation of the IPO includes the following: 

The government will hold a majority stake even after the IPO. 

There will be a 10% reserve for policyholders of LIC. 

The policyholders may even be able to get a discount on the offer price. 

 

Final thoughts on LIC IPO Launch Date 

As the red herring prospectus of the IPO is yet to be released, we still don’t know about the LIC IPO date 2021 or any other details of the IPO. There is no final confirmation for the LIC IPO date 2021 by the government. It is expected to be launched in the first half of the financial year 2022. 

According to some media reports, LIC is planning to file the draft IPO prospectus with SEBI by the first week of December. 

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