ADVERTISEMENT

LIC IPO: Must-Know Facts About India's Largest Insurer

Did you know Life Insurance Corporation of India gets a higher share of household savings than the SBI, India's largest lender?

<div class="paragraphs"><p>Pedestrians pass a Life Insurance Corp. of India branch office in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)</p></div>
Pedestrians pass a Life Insurance Corp. of India branch office in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Did you know Life Insurance Corporation of India gets a higher share of household savings than the State Bank of India, India's largest lender? Or, as a UBS report points out, it holds more state and central government bonds than the Reserve Bank of India?

LIC is on track to list on the bourses by March-end. The insurer on Feb. 13 filed a draft prospectus with the market regulator for what may be the nation’s biggest initial public offering. The IPO is an offer for sale of more than 31.6 crore equity shares by the Government of India.

UBS, citing media reports, said the government could raise Rs 65,000 crore ($8.6 billion) by selling a 5% stake, at a listing valuation of $172 billion (Rs 13 lakh crore). “At this scale, LIC would be the third-largest stock in India by market cap, and the 32nd-largest by free float, ensuring an entry into mainstream indices such as the Nifty 50.”

Opinion
India State-Run Insurer LIC Seeks $8.7 Billion From IPO as Roadshows Start

Here are a few interesting facts, compiled by UBS, about India’s biggest insurer:

Household Savings

Nearly Rs 10 of every Rs 100 saved by an Indian household each year goes to LIC, making it larger than even the perceived staple of household savings—a deposit with State Bank of India.

The government, according to UBS, is looking to tap into LIC’s large customer base (280 million policies, about one per family in India) to generate buying interest in the IPO.

LIC IPO: Must-Know Facts About India's Largest Insurer

Sheer Scale

2021 saw a record capital-raising of $34 billion, of which IPOs accounted for $16 billion. The government’s target for LIC is 25% of last year’s total capital-raising.

LIC IPO: Must-Know Facts About India's Largest Insurer

In 2021, retail investors accounted for 32% of IPO subscription, and domestic institutional investors 21%. According to the UBS report, around half the LIC issue will be reserved for non-institutional investors and retail. “Successful completion of this IPO could have some impact on the market, and on the future IPO pipeline.”

LIC IPO: Must-Know Facts About India's Largest Insurer
Opinion
LIC IPO: LIC's Death Claims In Six Months Of Second Wave Higher Than Full Pre-Covid Year

Largest Fund Manager In Indian Equities

With $520 billion total assets under management, LIC is the largest institutional investor in Indian markets.

Equity AUM of $130 billion gives LIC a 29% share of domestic institutional equity AUM—a shade more than half of all equity mutual funds in India.

LIC IPO: Must-Know Facts About India's Largest Insurer

With this, LIC has about a 4% stake in Indian equities, making it the single-largest stakeholder after the government (promoter stake), albeit this peaked in 2017 and has been falling gradually.

LIC IPO: Must-Know Facts About India's Largest Insurer

Crucial For Government

LIC owns over 19% of all government bonds (central and states), making it bigger than the Reserve Bank of India, and is surpassed only by the commercial banking system (that need to hold government bonds per regulations).

After listing, LIC would have the largest investment in the government’s portfolio of listed equities—43% of $377 billion in AUM. “This is important for government budget financing through divestments. At its valuation, proceeds from LIC would help meet the budgeted divestment target for FY22.”

LIC IPO: Must-Know Facts About India's Largest Insurer
Opinion
LIC IPO: Life Insurer's Embedded Value Is Out. Here's What Could Be The Offer Price.