Digging information about the upcoming IPO by the domestic brand LIC? Is it a good idea to buy-in the offer? What is it all about? This article is the entire guide to the LIC IPO with all the necessary details about the company, fundraising, and profit motives. However, before starting up on the details about this IPO, let’s have a brief understanding of What is an IPO and why is LIC coming up with one? A complete LIC IPO Review covering its lot size, price band, date and other important points.
Before discussing the LIC IPO details, let’s gather some crucial information on the company.
LIC: About the Company
The Life Insurance Corporation of India is the largest and oldest insurer in the country with assets worth Rs.31.11 lac crore as of the annual report of 2018-19, an increase of 6.08% from the previous year. It is the most trusted and sought over insurance brand in India. Established in 1956, the Government of India has owned all stakes of it and is the only promotor. By going public, the corporation is willing to sell out 10% of its stake to the general public.
The conglomerate has spread its arms at every nook and corner of India. Even if you’re in a rural place, it is very easy to find a LIC agent. As of today, LIC has 8 zonal offices, 113 divisional offices, 2048 branch offices, and more than 12 lakh agents spread across the country. Additionally, the brand has an international presence too, to cater to NRIs and other individuals of Indian origin. It is present as branches, joint ventures, partially/fully owned subsidiaries in 14 countries, namely: UK, UAE, Qatar, Oman, Singapore, Kenya, Sri Lanka, Fiji, Kuwait, Bangladesh, Bahrain, Mauritius, and Nepal.
LIC: A Glimpse of Financials
In the last decade, it showed a tremendous profit jump of 291% in its annual income. The earnings of the company as of the end of 2019 was recorded at Rs.2,21,574 crores. In the last financial year i.e. 2019, it collected premium worth Rs.1.37 lac crore, a hike of 45.5% from the previous year. apart from that, it also witnessed a hike in its estate portfolio. The rental income generated from LIC increased Rs.46.75 crore in just one year. By reaching such values, LIC was able to meet 90.18% of its annual target. the third source of income for LIC is its equity profits, which saw a little downfall as compared to FY18. The equity profit in FY19 was Rs.23,600 crore whereas the previous year’s equity profits of the company were recorded at Rs.25,650.
Some key ratios of LIC recorded as of the last FY are:
- The Gross Solvency ratio is 160%, 10% more than the standard stipulated by IRDAI.
- The persistency ratio indicates the number of policies against terms of annualized premium ranges from 50-60% and 60-77% respectively.
- The claim settlement ratio of LIC is around 98%.
- The NPA of the company stood at 6.15% of its total debt.
LIC IPO: Details
The Life insurance of India, previously a government-owned entity is now going public. This means it will get listed on the BSE and NSE exchanges and people would be able to trade on its stocks. For this purpose, it is releasing an Initial Public Offer through which, people can grab the company’s shares at face value and then reap on profits in the form of dividends, as and when the company procures them.
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This is being done as a part of the disinvestment policy of the Government of India wherein it raises funds from the general public by selling a stake in government-owned assets. In this fiscal budget discussion of 2020-2021, the finance minister Nirmala Sitharaman announced a sale of LIC’s stakes to ‘unlock its full potential’. She opined in the conference that by releasing this IPO, the people of the country would be able to create wealth out of the profits made by LIC.
Investing in an IPO: Things to Consider
Some basic things to check before investing in an IPO are:
- The past performance of the company.
- Its debt over the years.
- What are its future prospects.
- The reasons behind it going public.
The main advantage of a company going public is more transparency of operations, more working capital for expansion, and permission to trade in the market. Here, we will cover all such information including the specific one such as allotment, prices, dates, IPO size, etc.
LIC IPO: Details
The LIC IPO shall be listed on both BSE and NSE exchanges. Below are given the specifics of the allotments such as price, size, date, allotment, and promotors.
LIC IPO: Dates and Price Band
The declaration of IPO by LIC was made the last February, during the fiscal budget conference 2020. However, the exact dates of the IPO are yet to be released. the fact known is that it would be sometime in this year itself. However, in July 2020, Delloitte was decided as the pre-IPO advisor by the government of India. The IPO is expected to raise around Rs. 70,000 crore with a face value of Rs. 10 per equity share. The price band is yet to be known.
| IPO opens | 2020 |
| IPO closes | 2020 |
| Face value | Rs.10 per Equity share |
| Price band | Coming Soon |
| Listing on | BSE & NSE |
| Retail proportion | Equity |
| Equity | Share |
The details shall be updated as and when available.
LIC IPO Size
LIC is set to raise around Rs. 70,000 crore by selling 10% of its stake. The IPO is a complete book built issue with an employee reservation percentage. The % set aside for Qualified Institutional Bidders (QIB) is 50%, Non-institutional investor is 15% and 35% of the total issue is set aside for retail investors.
| IPO size | Rs. 70,000 crore |
| Issue type | 100% Book built |
| Issue proportion | QIB- 50% NII- 15% Retail-15% |
The details shall be updated as and when available.
LIC IPO Market lot
The market lot of an IPO indicates the minimum and the maximum number of shares an investor can subscribe to. It is important to know this value before buying it in the IPO.
| Lot size | Coming Soon |
| Maximum amount | Coming Soon |
| Minimum amount | Coming Soon |
The details shall be updated as and when available.
LIC IPO: Review
Considering all the factors and the previous reports of the company, we can conclude that LIC is a profitable venture and worth giving a shot at. The disinvestment policy will make its operations more flexible as well as transparent. The IPO will also help attract foreign capital to the Indian insurance market and since it is a public entity now, the retail investor would benefit from it.
However, the ownership of the company should not be doubted due to the IPO. the major stakes are still with the Government of India and the corporation intends to keep it that way, avoiding a change in ownership patterns.
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What do you think? Is the LIC IPO worth investing in? What are your reviews on this attractive IPO and its allotment? Do let us know your thoughts below!