LIC IPO: India’s Largest Life Insurer Files For Nation’s Biggest IPO
LIC pegs its embedded value at Rs 5.39 lakh crore.
Life Insurance Corp. of India has taken the first step to go public as it sought the market regulator’s approval for what will be the country’s biggest-ever initial public offering.
The maiden offer by the nation’s largest life insurer will comprise an offer for sale of more than 31.6 crore equity shares at a face value of Rs 10 apiece by the Government of India, according to its draft red herring prospectus filed with the Securities and Exchange Board of India on Sunday. This will be subject to market conditions, receipt of applicable approvals and other considerations.
The LIC IPO will comprise sale of 5% of its equity shares. According to SEBI norms, a company with a market capitalisation of over Rs 1 lakh crore at the time of IPO could offer at least 5% of its equity shares. LIC has a total of 632.49 crore outstanding shares.
LIC’s embedded worth—a key valuation metric—was at pegged at Rs 5.39 lakh crore as of September-end, the draft prospectus said. The insurer for the first time has released its embedded value.
The Department of Investment and Public Asset Management is in touch with SEBI to ensure all approvals come through for the IPO to be completed by March 2022.
The IPO is crucial for the government because it would make up the bulk of its plans to raise Rs 78,000 crore through asset sales in the ongoing fiscal. The government in the recent budget slashed its divestment estimates for FY22 from Rs 1.75 lakh crore. So far, it has raised only around Rs 12,000 crore, including Rs 2,700 crore from the sale of Air India.
The mega issue will be managed by 10 book-running lead managers—SBI Caps, Kotak Mahindra Capital, ICICI Securities, Axis Capital, JM Financial, Goldman Sachs, JPMorgan, Citigroup, Nomura, and Bank of America Securities.
Financials
The state-owned insurer reported an after-tax profit of Rs 1,437 crore in the six months through September 2021, while its revenue stood at Rs 3.4 lakh crore. It has an investment of Rs 37.7 lakh crore towards policyholders’ funds and the company is debt-free as on Sept. 30.
The 13th and 61st month persistency ratios by premium stood at 78.8% and 60.6%, respectively, as on Sept. 30, 2021.The solvency ratio stood at 183%, well above the minimum requirement of 150%. It earned an investment yield of 7.17% for April-September.
LIC’s gross and net non-performing asset ratios stood at 6.57% and 0.05%, respectively, on Sept. 30.
Fact Sheet
LIC has an omni-channel distribution network. As on Sept. 30, 2021, it had:
13,43,587 individual agents.
72 bancassurance partners (comprising eight public sector banks, six private sector banks, 13 regional rural banks, 42 cooperative banks, one foreign bank).
175 alternative channel partners (comprising 44 insurance marketing firms, 59 brokers, 72 corporate agents).
One portal on LIC’s website for digital sales.
3,463 micro-insurance agents.
2,048 branch offices and 1,554 satellites office in India.
In Fiscal 2019, Fiscal 2020, Fiscal 2021 and six months ended Sept. 30, 2021, LIC’s individual agents contributed 95.81%, 94.74%, 93.80% and 96.82% of its new business premium for its individual products.
LIC has a presence across India and distributes its policies in all states, covering 91% of districts in India.
It had 2,395 offices located in tier 3 and tier 4 centres, and 177 offices located in tier 5 and tier 6 rural-centres.
LIC’s rural individual share new business as per percentage of its total individual new business in India was 19.80% in policies, 19.79% in number of lives, 13.01% in new business premium and 14.54% in sum assured.
LIC’s mobile app for policyholders had more than 5.25 million registered users.
It spent Rs 103.4 crore, Rs 273.9 crore, Rs 153.4 crore and Rs 34.8 crore on information technology on a standalone basis in FY19, FY20, FY21 and the six months ended Sept. 30.