Will the LIC IPO end up being the much awaited and biggest IPO of the year?

One insurance company many of us grew up listening about is Life Insurance Corporation of India (LIC of India – Apki apni). LIC is an Indian state-owned insurance company founded in September, 1956 by government of India.

An Initial Public Offer commonly known as IPO is the process by which a company can go public by sale of it’s stocks to the general public. The company offering securities is known as the issuer and does so with the help of a merchant banker.

Going public is a big step for any company as it involves sharing profit and raising money from the general public. Further giving the company better opportunities to grow and expand.

---

Join our Whatsapp broadcast to achieve Financial Freedom. Click : Taxationwealth/join

---

Details of LIC IPO 2020

In the budget of 2020, finance minister of India Nirmala Sitharaman declared that the government is contemplating listing LIC of India in the after market.

The government has already initiated the process to launch the initial public offer. In the Indian capital market this IPO can be among the biggest initial public offers ever launched given the company is the largest institutional investor and insurer.

One of the reasons behind immense trust of people in LIC is the fact that it offers sovereign guarantee to the policyholders. With a balance sheet of more than Rs 30 lakh crore in financial year 2019, even a 15-20% stake sold to general public would be a huge step for the company.

• Date of Issue – Second half of FY20-21 (Date yet to be announced)
• Issue Type – 100% book built issue
• Maximum Bid amount – 2 Lakhs for Retail investors
• Qualified Institutional Buyers – 50% of the issue size
• Non Institutional Buyers – 15% of the issue size
• Retail Individual Bidders – 35% of the issue size
• Listing – NSE as well as BSE

Benefits to Policyholders

After issuing shares to public through the LIC IPO, the company will be bringing more transparency about it’s corporate affairs to the market in order to improve and retain it’s share price.

Investors can benefit from choosing the equity of the insurer which has been making underwriting profits as well as profits on it’s investments.

Increased scrutiny of investments made by the corporation in equity as well as bond instruments after it gets listed on stock exchanges.

Life Insurance Corporation (LIC) – The Investment Giant

The corporation has collected premium of Rs 1.37 lakh crore in the FY 2018-2019 with a equity profit of Rs 23621 crore. The insurer’s total assets had touched an all time high of Rs 31.11 lakh crore in 2018-2019. Currently more than 70% of the market share is held by Life Insurance Corporation of India.

In the 10 year period from financial year 2009-2019 the company saw a jump of 291% in it’s income from investment. According to the annual report issued by the company for FY2018-19 the income from investment showed a total of Rs 221573.72 crore.

TW Bonus Point ~

The company had monopoly in the insurance business from 1956 to 2000. The government of India is planning to raise funds between Rs 80000 to 100000 crore through this public offering.

This IPO offers quite an opportunity to retail investors and employees to invest in the company for long term as well as quick listing day gains. One of the speculations include that the policyholders may get a reserved quota in the IPO.