LIC IPO Expected Soon: Investors Know What to Expect

LIC or Life Insurance Corporation is a very prominent name in the Indian life insurance industry. Almost every Indian investor is familiar with the name because of the legacy of LIC which has crossed six decades now. LIC, which is owned and managed by the Government of India is going for its largest ever public issue probably in this calendar year 2021. In budget FY22, the Indian Finance Minister – Mrs. Nirmala Sitharaman announced her intention for LIC to launch a public issue in order to complete its ambitious disinvestment target of Rs 1.75 trillion for FY22.

Based on the assumption of 10% stake dilution, the expected size of LIC’s IPO could be around Rs 80,000 crores – Rs. 1 lakh crores. If this turns out to be true, the investors are soon going to witness the largest IPO in the history of India Financial Markets. It is expected that this IPO can be a game-changer for broker industry and for exchange perspective.

Reservation for LIC Policyholders

Government has proposed to keep around 10% of the IPO size reserved for the people who are LIC policyholders, which is significant as majority of policyholders don’t have DEMAT account, which possibly paws way for all market intermediaries to flourish. Currently, there are only 5.1 crores accounts in India, which is roughly 4% of Indian population. LIC IPO might push these number significantly.

LIC vs Private Insurance Providers

LIC is unarguable leader in the life insurance space. Despite the presence of private insurers for nearly 20 years, LIC continues to dominate the life insurance business in India. It has a market share of more than three fourth of the number of policies and a 71% market share in terms of first year premiums however it LIC appears to be losing its market share to some big private players in the life insurance industry. SBI Life, ICICI Prudential or HDFC Life Insurance have used their banking chain to push their insurance products and have aggressively spread their presence over time. But in recent times LIC has failed to hold upper-middle-income band and High Net-worth Individuals, as LIC has lost much of its market share to private players in recent years. Low and middle-income earners are among the main target groups for LIC.

Despite being hit by the COVID-19 pandemic, the Indian IPO market post-COVID-19 gave a stellar performance for primary markets as more than 80% issues gave decent listing gains, year 2021-22 might turn out to be better for new issues. LIC also has potential for decent listing gains, LIC might get value unlocking which was in cage for decades. Though, public sector undertakings have failed to give returns for longer term. Coal India which was one of the largest primary market issues in late 2010, has not turn out to be a huge value creator which is expected to be one of the treats for LIC also.