The biggest IPO in the history of the Indin stock market is here. In this article, we will take a look at LIP IPO Review 2022 and discuss the most awaited mega IPO of the Life Insurance Corporation of India. The IPO will open for subscription on May 4th, 2022, and close on May 9th, 2022. The company is going for an Offer for Sale of Rs 21,008.48 Cr. Keep reading to find out more about the IPO!
Table of Contents
LIC IPO Review 2022- About the company
Life Insurance Corporation of India is one of the oldest and largest insurance providers serving for more than 65 years in India. It is the only public insurance player in the country.
LIC has 2,048 branch offices and 1,559 satellite offices in India, covering 91% of all districts in India. It also has an international presence in countries like Fiji, Mauritius, United Kingdom, Qatar, Kuwait, Oman, United Arab Emirates, Bangladesh, Nepal, Singapore, and Sri Lanka.
The company has a 61.6% market share in terms of premiums (or GWP) and a 61.4% market share in terms of New Business Premium (or NBP). In addition to that, it holds a 71.8% market share in terms of a number of individual policies issued and an 88.8% market share in terms of a number of group policies as of December 31, 2021.
As of December 31, 2021, LIC is the largest asset manager in India with a total AUM (comprising policyholders’ investment, shareholders’ investment, and assets held to cover linked liabilities) of ₹40.1 trillion on a standalone basis.
Apart from that, LIC’s investments in listed equity represented around 4% of the total market capitalization of NSE as of December 31, 2021.
Financial Highlights of LIC
LIC generated a Net Profit of Rs 29,741.39 Cr in the last financial year ending March 31, 2021. In the current financial year, i.e. nine months period that ended on December 31, 2021, LIC has generated a net Profit After Tax of Rs 17,153.12 Cr. Here is a quick snapshot of the LIC Financial as shared by the company in its DRHP:
LIC Financial Comparison with the peers
LIC IPO Review 2022- Industry Overview
The insurance industry in India saw rapid growth from the year 2016. It was mainly due to the increased awareness and shift in the mindset of people towards insurance. The total life insurance premium grew at a robust 12% CAGR from Fiscals 2016 to 2020, which was much faster than the 6% annual growth witnessed in India’s nominal GDP during that period.
The size of the Indian life insurance industry was ₹6.2 trillion on a total-premium basis in Fiscal 2021, up from ₹5.7 trillion in Fiscal 2020. The industry’s total premium has grown at 11% CAGR in the five years ended Fiscal 2021. CRISIL Research forecasts the industry’s total premium to grow at 14-15% CAGR over the next five years, to reach close to ₹12.4 trillion by Fiscal 2026.
Special Provisions for LIC IPO
The Life Insurance Corporation of India has come up with a special provision for its policyholders. Being the largest insurance player in the country, the company has made a special reservation of 10 percent of the issue size for policyholders.
A discount of Rs 60 per equity share is to be offered to the eligible policyholders bidding from the policyholder reservation portion.
Strengths of the Company
- LIC holds the title of being the 5th largest company globally in terms of life insurance GWP and 10th globally in terms of total assets and thus is a trusted brand name.
- The company has diversified into various segments and has a Cross-cyclical product mix and is called a part insurance company and part investment company.
- LIC has a pan India presence with the largest and strongest network connection having more than 1.33 million individual agents.
- The company has modified its business technologically and has multiple apps, portals,s, and websites to cater to the needs of its customers.
- To manage its risk efficiently, the company has a diversified its investments into various asset classes.
- LIC has a highly experienced and qualified management team, a distinguished Board, and a strong corporate governance framework.
Weaknesses of the Company
- LIC is a company governed by the Life Insurance Corporation Act and not the Companies Act. Therefore, the shareholders will have fewer rights.
- The covid 19 caused a lot of disruption in their business as the agent’s movements were restricted and the expenses incurred to move to new technologies were significantly higher.
- The company’s business is strongly driven by its brand name and any negative publicity can have adverse effects on its business.
- LIC’s assets and liabilities are highly dependent on the interest rates. Any change in the rates due to economic factors can affect profitability.
- The persistency ratio is the number of total policies that an insurer has to the policies that are renewed or in force. Any sudden withdrawal of policy by a large group of people can affect the business.
LIC IPO Review- Grey Market Information
The shares of LIC traded at a premium of 8.96% in the grey market on May 2nd. The shares tarded at Rs 1034. This gives it a premium of Rs 85 per share over the cap price of Rs 949.
LIC IPO Review- Key IPO Information
Promoter: President of India, acting through the Ministry of Finance, Government of India.
Book Running Lead Managers: Kotak Mahindra Capital Company Limited, Axis Capital Limited, BofA Securities India Limited, Citigroup Global Markets India Private Limited, Nomura Financial Advisory and Securities (India) Private Limited, Goldman Sachs (India) Securities Private Limited, ICICI Securities Limited, JM Financial Limited, J.P. Morgan India Private Limited, and SBI Capital Markets Limited.
Registrar: KFin Technologies Limited
| Particulars | Details |
|---|---|
| IPO Size | ₹21,008.48 Cr |
| Fresh Issue | - |
| Offer for Sale (OFS) | ₹21,008.48 Cr |
| Opening date | May 4, 2022 |
| Closing date | May 9, 2022 |
| Face Value | ₹10 per share |
| Price Band | ₹902 to ₹949 per share |
| Lot Size | 15 Shares |
| Minimum Lot Size | 1 (15 shares) |
| Maximum Lot Size | 14 ( 210 shares) |
| Listing Date | May 17, 2022 |
The Objective of the Issue
The net proceeds of the offer will be used to:
- Achieve the benefits of listing the Equity Shares on the Stock Exchanges
- Carry out the Offer for Sale of up to 221,374,920 Equity Shares by the Selling Shareholder
In Closing
In this article, we looked at the details of LIC review 2022. Being the biggest IPO in the Indian Share market history, it can be an opportunity to look into the company and apply for the IPO after analyzing its strengths and weaknesses.
Analysts remain divided on the IPO and its potential gains. Brokering houses such as GEPL Capital, Investmentz Ltd and Ventura Securities limited have assigned a buy rating for the IPO. Looking into the IPO size, the chances of the IPO investors getting listing gains is minimal. However, in the longer term, LIC being the leader in its industry may be worth checking into.
Are you applying for the mega IPO? Let us know in the comments below. Happy Investing!
