LIC IPO: The Biggest Listing to Watch Out for in 2022
New Delhi, Dec 22: The government of India is prepping up to complete the biggest Initial Public Offering (IPO) of recent years in the form of Life Insurance Corporation (LIC). It goes to public in the early 2022 and in the current financial year ending March 2022.
What is IPO?
The first instance of selling shares of a private company to public is Initial Public Offering. It is carried out to raise funds for working capital, debt repayment, expansion, acquisition, and other purposes.
Any company that goes public will list its shares on the stock exchanges of India - NSE or BSE. People can purchase the shares of the company by filling up the IPO application.
A company coming up with an IPO means it is becoming a public enterprise from a private one. Thus, often an IPO is referred to as "going public". They need to do the same through a broker or a bank with which the IPO is taking place or associated with.
After witnessing a wave of IPOs in the market in 2021, the government is heading towards selling 5-10 per cent in LIC, which is termed as India's biggest IPO ever.
After coming into existence on September 1, 1956, with an initial capital of Rs 5 crore and an asset base of Rs 352.20 crore, LIC today has an asset base of over Rs 38 lakh crore with a life fund to the tune of Rs 34+ lakh crore.
How Big in LIC?
From 168 offices in 1956, it today has 8 Zonal Offices, 113 Divisional Offices, 2,048 Branch Offices, 1,546 Satellite Offices, more than 42,000 Premium Points and Life Plus Offices, over 1.14 lakh employees and 10+ lakh agents as of March 2020.
With 29 crore plus policies in force, the LIC commands a market share of over 66 per cent. Thus becoming the biggest financial institution in the country.
LIC operates in 14 countries through branch offices, wholly-owned subsidiaries and joint ventures in Fiji, Kenya, Mauritius, England, Bahrain, Nepal, Sri Lanka, Singapore and Bangladesh, among others.
In 2020-21 alone, it sold over 2.10 crore policies and settled 229.15 lakhs claims amounting to Rs. 147,754 crores in the year.
The government owns a 100 per cent stake in LIC. Once listed, it is likely to become the country's biggest company by market capitalisation with an estimated valuation of Rs 8-10 lakh crore.
However, the government's decision has met with a mixed response. While a large section of people is excited about the LIC going public, critics have questioned the intent of the government to raise capital for the cash-rich company as only less than two per cent of people have access to shares in the country.
The argument that the listing will bring transparency has not convinced many as the LIC is considered as an efficient institution that has heavily invested in central and state government securities, housing, irrigation, roads, etc.,
In 2019-20, LIC subscribed to Rs 1,78-crore worth of Government of India securities and Rs 1.28 crore of State governments' borrowings apart from investing ₹52,297.79 crore in the social sector, as per a report on Hindu Businessline. Hence, there is opposition from some quarters over selling off some stakes.
The cash-rich company with a huge consumer base comes out with public disclosures every quarter, submits reports to the regulator IRDAI every month and its accounts are placed in Parliament for scrutiny.
The LIC is known for providing social security and if listed, 'profit' becomes the driving factor, critics point out, stating that the company might not be in a position to invest in developmental projects in the country.
LIC Policyholder Quota
The government has indicated that up to 10 per cent of LIC's IPO issue size could be reserved for its policyholders as it directed the company to permit policyholders as one of the reserved categories in any LIC public offering in the future. "In order to participate in any such public offering, policyholders will need to ensure that their PAN details are updated in the Corporation's records," an advertisement from the life insurance company informed the policyholders.
It means the customers should link their PAN card to their policy and a Demat account is mandatory.