LIC IPO: A Major Booster For India's Stock Market

IPO bound Life Insurance Corporation of India (LIC) is round the corner. It is projected that the IPO would make a huge impact on the Indian Capital Market. LIC is huge, in terms of almost everything. LIC is a government-owned insurance company with around 66% country's insurance market share as per LIC annual Report 2020-21, which makes it India's biggest insurer.

LIC - An Overview

LIC was established by the government of India in 1956 by merging 245 insurance companies. It is a unique institution established by an act of Parliament. It's difficult to quantify the full worth of LIC, which has roughly 2,048 branches around the country and a large network of LIC agents.

Having said that, LIC holds half of the country's insurance market, whereas the other half is shared by the other insurers of the country. The insurance industry has always been responsible, with a perfect track record of protecting policyholders' interests, and LIC is the front runner in safeguarding the insurer.

The company has other businesses as well such as LIC Housing, LIC Mutual Fund, LIC Pension Fund, LIC Cards Service. Also, the company is a majority stakeholder in IDBI bank.

The LIC IPO

The government is working feverishly to list the LIC on the stock exchanges. However, as per the government officials, the IPO would likely go live for bidding by the end of March, ending Financial Year 2021-22. The pre-IPO process is already underway. The IPO details such as bidding date, share price, Lot size, issue size, and other things are yet to come.

The LIC IPO is in the news for the past 1 year and it is getting delayed for months. However, there are multiple reasons why it getting delayed. One of the reasons is its size. The second reason is, it is a Government-owned company, which makes the whole process complicated.

An official stated earlier this month that authorities will evaluate and alter laws on foreign direct investment to make it simpler to attract international firms. Foreign equity shares are permitted in most Indian insurers, but not in the LIC as it is a unique institution.

The permission for foreign interests in the massive offering would allow global funds to not only participate in the sale but also to acquire more once it was listed on the stock exchange. Late this month, regulators announced more changes, including tightening regulations regulating anchor investor share transactions.

The government has a separate category for LIC IPO named it Policyholders category. Users who are LIC policyholders will be able to apply for the IPO in this category, up to a maximum of INR 2,000,000. The Government of India has declared that policyholders would be entitled to up to 10% of the issue amount in the LIC IPO.

The government is keen on LIC IPO and backs its decision. Governemnt says, it will bring more accountability and openness to the insurance. For the government to fulfill its disinvestment aim, the listing will be critical.

The company has filed the draft with the Securities and Exchange Board of India (SEBI). In the IPO government is selling 5-10% of its share, as per present reports. The government is projected to get between INR 600 billion and INR 800 billion from this IPO.

Looking at the size of the IPO, the SEBI plans to hire 120 senior executives across its legal, information technology, research, general, and official language divisions, accounting for nearly 14% of its total workforce.

The IPO is said to be India's biggest ever IPO in the history of the Indian stock exchange. The IPO is predicted to be a game-changer for the Indian Capital Market, which will help the economy of the country grow in the pandemic era.