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Tata Capital > Blog > Wealth Services > All you need to know about the LIC IPO

Wealth Services

All you need to know about the LIC IPO

All you need to know about the LIC IPO

Life Insurance Company is India’s largest insurance provider, in fact until the previous generation, insurance was synonymous with LIC. They continue to dominate the insurance market with a whopping 66% market share in the new premiums business. They offer a range of products from traditional insurance plans to unit-linked plans which cater to varied financial goals. The LIC IPO has been the most awaited divestment in recent times, given the size of the company, it is not surprising that the company has been able to maintain the buzz around its IPO over the past few years.

Additional Read – Top 5 investment lessons learnt during the pandemic!

Fact checks – LIC:

  1. As of 30 September 2021, the AUM (assets under management) stood at Rs. 39 lakh crores, this includes the insurance policyholders’ funds, shareholders’ investments and assets held to cover linked liabilities.
  2. The funds managed by LIC are more than the money the entire mutual fund industry manages on a combined basis, it owns ~4% of all the listed stocks in India and has a holding in Government bonds greater than that of RBI.
  3. LIC was formed in September 1956, by merging and nationalising 245 private insurers in India. It was the only insurance company in India until the arena was opened up to the market in 2000.
  4. It also ranks as the fifth-largest life insurance globally in terms of collected life insurance premium, in terms of total assets under management, it ranks 10th.
  5. LIC employs over 13.5 lakh agents who are integral to the new premiums business. The agents can align the varied requirements of the clientele with one or the other product of LIC, thereby making it easier to make a sale.
  6. The company’s promoter at present includes the President of India, acting through the Ministry of Finance (MoF). Thus, it enjoys unparalleled brand loyalty and a high trust factor among the old and new generations of India.

The IPO is proposed to carry out the sale of 316.25 million shares by the existing shareholders. It will benefit the company by listing the equity shares on the stock exchange which will enable it to be owned by a wider set of audience. The key details regarding the issue such as IPO opening date, closing date, and price band are yet to be announced. It is proposed to be a 100% book-built issue.

What is a book-built issue? It is an option book building process whereby 100 percent of the securities is offered on a firm basis or is reserved for promoters, permanent employees of the issuer company. It may also be offered to shareholders either on a competitive basis or on a firm allotment basis.

How to apply for the LIC issue?

If you are a LIC policyholder, you have a backdoor entry into the LIC IPO. You will have to produce your PAN card linked to your LIC policy account.

This announcement not only attracted the interest among investors who hold the insurance policy but also encouraged those who have not linked the PAN details and completed the KYC compliance to complete the required documentation.

In addition, many individuals are availing of LIC policy in a fast-paced manner to be able to take the privilege of applying for the IPO through this route, which is preferential.

Benefits of applying via the policyholder route:

LIC based on approvals reserve a part of its offer size for policyholders, there is a possibility of a discount on the offer price. You must link your PAN details with your policy number and apply through a Demat account.

All policyholders were requested to update their PAN details before 28th February 2022. They were allowed a 15-day window from the date of submission of the draft red herring prospectus to the SEBI as of 13th February 2022.

Scenarios of policy holding and application process:

  1. Despite having multiple policies, you are allowed to apply for the IPO only once.
  2. If you are the proposer for any policy for a minor child, then as you are the owner of the policy, you are eligible for any reservations specifically set aside for the policyholder reservation portion.
  3. If the policy is held jointly, then only one of the holders can apply under the policy reservation category. The other individuals can apply through the regular route applicable for non-policyholders.

Additional Read – Are you a budding entrepreneur? Here are some wealth management strategies

The other route is applying as a non-policyholder, wherein you will apply as you apply for any other IPO. You will have to apply under the relevant category of either the retail investor or institutional investor.

To get more information, you can connect with the relationship managers at Tata Capital Wealth.

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