India’s biggest ever public issue of shares – and 11th largest in the world – by an insurer, Life Insurance Corporation of India (LIC) will open on May 4 and close on May 9. It will be open for anchor investors on May 2. It is lead managed by 10 merchant bankers.
 
Despite cutting the size of the issue to collect Rs 500 billion earlier to around 60% of it now, due to prevailing poor market conditions, shares will be offered in a price band of Rs 902-949, bearing face value of Rs 10 each.

At Rs 21,000 crore, the issue size has been cut from 5% of the firm’s equity earlier to 3.5% now and 221,374,920 equity shares will be up for sale by the President of India acting through the Ministry of Finance, Government of India, the selling shareholder.

Based on the upper end of issue price, post issue, the 65-year-old insurance behemoth will be valued at about Rs 6 trillion. The floor price is 90.2 times the face value of equity share and Cap price is 94.9 times the face value of the equity share. LIC shares are expected to be listed on May 17.
 
As per SEBI ICDR regulations, not more than 50% of the net offer will be open for qualified institutional buyers, not less than 15% of the net offer shall be available for allocation to non- institutional bidders and not less than 35% of the net offer shall be available for allocation to retail individual bidders. Retail investors and eligible employees will get a discount of Rs 45 per share and policyholders have been given a discount of Rs 60 per equity share. Investors can bid a minimum of 15 equity shares and in multiples of 15 equity shares thereafter.

LIC has a base of 1.15 lakh employees and 13.5 lakh individual agents.

As per the insurers draft papers for initial offering, LIC booked profit worth Rs 42,862 crore from the sale of investments in the first nine months of the fiscal year 2022. Profit from sale of investments largely equity assets were already 93 % of the record profits of Rs 46,187Cr by LIC for FY ended March 31, 2021.

LIC is the fifth largest life insurer globally by GWP and the largest asset manager in the country as at December 21, 2021 with an established track record of financial performance and profitable growth. The insurer has 64%market share in terms of premium and holds a stake of Rs 9.53 lakh crore in different companies. It has more than 1% stake in 278 companies and $507 billion assets under management.

The total investment in equity as of the nine months ended December 2021 stood at Rs 9.85 trillion against Rs 7.97 trillion in FY21. As of December 2021, LIC’s AUM was Rs 40.1 trillion. LIC’s AUM is more than 3.2 times higher than the total AUM of all private life insurers in India.
 
The product portfolio of insurance behemoth in India consists of 32 individual products, and 7 individual optional rider benefits. It has 11 group products. In fiscal 2021, forty two percent customers were in the age bracket of 27 to 40 years with the same percentage of individual policies sold in fiscal 2021 and 9 months ended December 31, 2021 respectively.

As at December 31, 2021 the corporation has covered all 91% districts in India.
 
Tuhin Kanta Pandey, secretary, Department of Investment and Public Asset Management, said that considering the capital market environment, the issue size is right. He said LIC’s valuation is fair and attractive and it was established after widespread consultation with merchant bankers.

“Optimum value is dependent on situation you are in. It is a fair and attractive valuation. The government was market player and wants to champion LIC as long-term value creator for shareholders. LIC’s embedded value is larger than the market cap of all the companies.
Domestic flows especially for LIC are good,” he told a press conference here Wednesday, adding that there is no plan to bring FPO (follow-on public offering) within the next one year.
 
LIC chairman M. R. Kumar said, “Time has come for LIC to be listed. LIC struggled in the first two decades to sell insurance in India. Then it gathered momentum in the ’70s and ’80s. That was LIC 1.0. Then it adapted to the competition, which was LIC 2.0. And now this is LIC 3.0,” adding that over a period of time LIC should be able to reach a private industry margin (stake) of 20 percent to 25 percent.
 
While domestic investors have continued their faith in the Indian market, foreign investors have pulled out almost nearly $20 billion from Indian stock markets. The proceeds of LIC issue will help bridge budget deficit for the government. In FY 2021-22, GoI divested stakes worth Rs 13,531 crore including that from Air India and NMDC.
 
According to Guarang Shah, senior vice president, Geojit Financial Services Ltd, the LIC issue has attractive valuation and the demand to subscribe it is already very high. There is a huge business opportunity as the pandemic has taught people to insure their health.
 
“Despite being the largest life insurance company to be listed and sixth largest in terms of market capitalisation, it is priced cheaply when compared with peers. A large number of people are still not insured so there is a huge business opportunity. The pandemic has actually taught a large section of population that insurance is not a product for saving tax but a product to insure the future of their dependents and families. This is going to be a multiplier in terms of new insurance premium run rate going up,” he says.