LIC IPO Date 2021-Price: Government looking at listing, Details Explained

LIC IPO Date 2021-Price: Life Insurance Corporation (LIC) initial public offer (IPO) will be launched sometime in FY22. This was announced by Finance Minister Nirmala Sitharaman in her Budget 2021 speech. DIPAM, which is looking after the issue, has said LIC IPO launch date will be after October, 2021. Reports indicate management of LIC has proposed to reserve up to 10% in the retail segment of the IPO for policy holders as they want the policy holders also to be their shareholders. As far as LIC IPO date is concerned, some reports say that the offer may hit Indian markets during the Diwali period. LIC IPO listing is likely to be a blockbuster and reward applicants with a Bonus. It is expected that the LIC IPO issue size could be as large as 1 lk cr.

Disinvestment Secretary Tuhin Kanta Pandey noted the fact that LIC is a complex undertaking but the government is up to the challenge and will complete the market offering post October. The government has already initiated its plan to clear all incumbencies on the way to the LIC IPO.

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Government of India plans IPO for Life Insurance Corp. LIC has built a strong brand but has been steadily losing market share to private peers. It is large in terms of premiums (+$ 50 bn) & AUM ($ 400 bn), but shareholder profit ($ 370 mn) & capital ($ 100 mn) are low as profit is redistributed to policyholders & dividend payout is high.

The LIC brand is synonymous with Insurance for a large swathe of Indian consumers:

LIC was formed in 1956 through the nationalization of about +200 insurance companies and provident societies. Backed by sovereign guarantee and a strong agency force of >1.2m, LIC has built an enviable brand. This is reflected in the fact that the overall life insurance segment has garnered 20-25% of households' financial savings.

LIC conceding market share to private players:

Jefferies said that LIC has 40% market share in new premiums but has been losing share in the retail segment to private players, reflecting expansion among the latter. LIC can also benefit if it can ramp-up digital platforms and the protection business. It will be interesting to see whether LIC pushes for aggressive growth in the savings/protection business ahead of a potential listing.

Large AUMs & premiums, but small profit & net worth:

Jefferies says that even as LIC mobilises US $50 bn of premiums annually and manages US$ 400 bn in AUM, it reported only US $ 370 mn of profit for the shareholder. This reflects the high share of participating products sold by the company for which it shares 95% of profits with policyholders leaving only a small pool of profits for the shareholder (government of India). Moreover, LIC’s net worth is small, at just US$100mn, as its sponsorship by the government allows it to operate with lower capital, and with almost all profits distributed as dividends to the government, retention of profit has been low.