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‘LIC 3.0’: Should You Invest? 3 Things to Know About India’s Biggest Ever IPO That Opens On May 4

LIC IPO, regarded as a crucial milestone for India’s life insurance sector will be in the price band of Rs 902 to Rs 949. The IPO will open on May 4 and close on May 9. It would offer a Rs 60 discount for policyholders and Rs 4o for retail investors/employees.

Updated: April 27, 2022 1:56 PM IST

By News Desk | Edited by Surabhi Shaurya

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LIC IPO listed on the stock markets on May 17, it has fallen to all-time low several times ever since (File Photo)

LIC IPO: The wait for India’s mega initial public offering (IPO) is over as Life Insurance Corporation’s (LIC) public issue offer is to open on May 2 for anchor investors and from May 4 to May 9 for the general public, the company confirmed in a press conference on Wednesday. “After the listing of LIC IPO shares, there will be LIC 3.0”, said Chairman MR Kumar.  Referring to the long-awaited IPO, which will remain open to subscription till May 9, Kumar confirmed that it (LIC IPO) will be in the price band of Rs 902 to Rs 949, with a Rs 60 discount to policyholders and a Rs 45 discount for retail investors and employee. On April 23, the LIC board gave its nod to cut down the issue size to 3.5% from 5% due to the market condition. A proposal to reduce the size of LIC’s IPO to 3.5% from 5% proposed in its draft red herring prospectus (DRHP) was tabled and approved at a board meeting held last week. 

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LIC IPO: Should you invest?

LIC’s IPO is considered a crucial milestone for India’s life insurance sector. In its report, Ventura Securities has decoded why LIC stands out on the upcoming IPO calendar.

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1: Market leader in the life insurance sector

“If Xerox has been a synonym for photocopy, Colgate for toothpaste and Band-Aid for adhesive bandages, LIC has been no different for life insurance. That’s the extent of dominance of LIC in India’s life insurance sector. As on March 31, 2021 the total Assets Under Management (AUM) of the life insurance sector stood at Rs 44.80 lakh crore of which 76% has been with LIC of India,” said Ventura Securities.

2: Unique business model

“Nearly 86% of premium underwritten by Indian life insurers in FY21 was from non-linked insurance policies and LIC has a 75% market share in this category,” as per Ventura Securities.

3. Enviable agent base

“The life insurance industry in India had an agent strength of 24.55 lakh as on March 31, 2021. Here too, LIC dominates. On the same day, LIC had a large pool of 13.5 lakh insurance agents spread across the country, of which 80% were active. LIC derives 94% of new business in the individual category form individual agents. No wonder, we see TV commercials appealing to individuals to become their own boss (Read: insurance agents). On the other hand, private insurers predominantly depend on corporate agents such as banks. Corporate agents account for nearly 58% of new business in the individual category”, said Ventura Securities.

Key Information About LIC IPO

  1. The much-awaited public issue offer of the Life Insurance Corporation (LIC) will be in the price band of Rs 902 to Rs 949.
  2. The policyholders will be offered a Rs 60 discount, while for retail investors, the discount will be Rs 45.
  3. On Monday, markets regulator SEBI gave its nod to the updated draft red herring prospectus, which lists a 3.5 per cent stake sale by the government instead of 5 per cent mentioned in the earlier draft papers.
  4. The IPO values LIC at Rs 6 lakh crore, and at an expected mop-up of Rs 21,000 crore, it will be the largest public issue in the history of the Indian capital market.
  5. The government is working towards getting large participation from pension and sovereign funds. They have given a big sweetener in the form of a commitment that there would be no dilution of stake within two years of the issue being launched.

How to Apply For The LIC IPO

In its draft, LIC stated that “all potential Bidders (except Anchor Investors) are required to mandatorily utilise the Application Supported by Blocked Amount (“ASBA”) process providing details of their respective ASBA Accounts, and UPI ID in case of RIBs, Eligible Employee(s) and Eligible Policyholder(s) Bidding using the UPI Mechanism, if applicable, in which the corresponding Bid Amounts will be blocked by the SCSBs or under the UPI Mechanism, as the case may be, to the extent of respective Bid Amounts.”

You can apply for the IPO through 2 means— internet banking and UPI. Currently, NCPI approved UPI apps live on IPO are – BHIM in partnership with companies like Bank of Baroda, IDBI Bank, UPI, AU Small Finance Bank, Axis Bank, Bandhan Bank, DLB, IndusPay, SBI, Yes Bank, ICICI Bank, HSBC, Yes Bank, HDFC Bank, and DBS among others. Also, Freecharge, Paytm, Google Pay, Phone-Pe, and MobiKwik allow IPO investment using UPI.

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Published Date: April 27, 2022 1:40 PM IST

Updated Date: April 27, 2022 1:56 PM IST