LIC IPO: What Does The Mega IPO Hold For LIC Policyholders?

On 13 February 2022, the government-owned insurer LIC has submitted its draught red herring prospectus (DRHP) for its much-awaited massive IPO with the market regulator SEBI. The LIC IPO, India's largest IPO, is expected to go public in the second week of March 2022. Prior to submitting DHRP, the government of India has set a disinvestment target of Rs 65,000 crore for the upcoming fiscal year in Budget 2022. It also reduced the target for the current fiscal year from Rs 1.75 lakh crore to Rs 78,000 crore.

As of September 30, 2021, the embedded value of the LIC IPO was around Rs 5.39 lakh crore. As per market reports, the LIC IPO will be valued at three to four times the embedded value. According to the draught report, the company had a 74.6% market share in terms of individual policies issued, an 81.1% market share in terms of group policies issued for fiscal 2021, and a 55% market share in terms of individual agents in India as of March 31, 2021.

The business would reserve 50% of the LIC IPO for Qualified Institutional Buyers (QIB). The quota for Non-Institutional Investors (NII) was set at 15%. As a result, LIC will retain 35% of the offer for individual investors. Given its size and strong market position, which is 66% market share in new business, its growth pace may fall short of that of some of the more agile private insurers.

The government of India has permitted the corporation to retain a share for policyholders in order to tap into approximately 30 crore LIC policyholders. A first-of-its-kind policyholders' quota designed for LIC IPO will allow LIC policyholders to purchase 10% of the LIC IPO at a reduced price. In addition, a part of the LIC IPO will also be reserved at reduced pricing for workers. Closer to the firm's IPO, further information on potential discounts for policyholders, staff, and others is expected.

Millions of new securities accounts were opened in India last month as LIC policyholders anticipated obtaining discounted shares. However, Policyholders need to complete a few mandatory tasks to tackle this 'policyholder' quota to avail the reserved 10% slot of the IPO for them.