Life Insurance Corporation of India (LIC) has completed filing its documents for listing. With all the hype it created last year and even today, we can say that it is one of the most anticipated IPOs. But before making an investment decision, it is crucial to research that investment opportunity. Let's go a little further.
This article covers:
- About LIC
- Operations of LIC
- Promoters of the company
- About LIC IPO
- Book running lead managers and registrar of the LIC IPO
- Objects of the LIC IPO
- Financials of LIC
- Peer comparison
- Strengths of the company
- Risks of LIC
About LIC
The LIC is India’s sole government-owned insurance provider. It is the largest firm in the Indian insurance industry, with a market share of more than 64.1% in terms of premiums and a market share of 66.2% in terms of new business premium.
The firm provides both participating and non-participating insurance products, such as unit linked insurance products, term insurance products, health insurance, saving insurance products, and annuity & pension products. It has a total AUM of Rs. 39,558,929.24 mn. as of 30 September 2021.
Operations of LIC
- The firm has eight Zonal offices, located in Delhi, Mumbai, Kolkata, Chennai, Kanpur, Patna, Bhopal, and Hyderabad.
- The company has 2,048 branches, 113 divisional offices, and 1,554 satellite offices as of 30 September 2021.
- It is present in Fiji, Mauritius, Bangladesh, Nepal, Singapore, Sri Lanka, the United Arab Emirates, Bahrain, Qatar, Kuwait, and the United Kingdom.
- It has the biggest agent network, with 1.35 mn. life insurance agents, as of 31 March 2021.
Promoters of the company
The corporation is promoted by the President of India, acting via the Ministry of Finance, Government of India.
About LIC IPO
- This IPO consists of an offer for sale of 316,249,885 shares.
- LIC IPO is likely to be listed on the BSE and NSE.
Book running lead managers and registrar of the LIC IPO
The joint global coordinators and lead managers of the LIC IPO are:
- Kotak Mahindra Capital Company Limited.
- Axis Capital Limited.
- BofA Securities India Limited.
- Citigroup Global Markets India Private Limited.
- Goldman Sachs (India) Securities Private Limited.
- ICICI Securities Limited.
- JM Financial Limited.
- J.P. Morgan India Private Limited.
- Nomura Financial Advisory and Securities (India) Private Limited.
- SBI Capital Markets Limited
The issue’s registrar is KFin Technologies Pvt. Ltd.
Objects of the LIC IPO
- To reap the benefits of listing the equity shares on the stock exchange.
- To carry out an offer to sell 316,249,885 shares by selling stockholders.
- General corporate purposes.
Financials of LIC
- As of 30 September 2021, it has posted earnings per share (EPS) of Rs. 2.38.
- As of 30 September 2021, the net asset value (NAV) stood at Rs. 12.68.
- As of 30 September 2021, it has posted a return on net worth (RoNW) of 18.76%.
- As of 30 September 2021, it reported an EBITDA of Rs. 1,519.47 cr.
Following are the financials for 2020 and 2021
Peer comparison
According to the offer paperwork, the company’s listed peers include the following:
- SBI Life Insurance Company Limited.
- HDFC Life Insurance Company Limited.
- ICICI Prudential Life Insurance Company Limited.
They are not, however, genuinely comparable on an apple-to-apple basis.
Strengths of the company
- Leading insurance provider in India and the world’s fifth largest insurer by GWP.
- A variety of life insurance plans to accommodate people’ varying insurance needs.
- Strong omni-channel distribution network with 1.34 mn. agents, 3,463 active micro insurance agents, 174 other channels, and so on.
- The largest asset manager in India, with a proven track record of financial performance.
- Management team with extensive experience and qualifications.
Risks of the LIC
Investments in equities and equity-related securities are risky. Before making an investment choice in this IPO, you should carefully consider the risk factors:
- The ongoing COVID-19 pandemic could adversely affect all aspects of the business, including:
(i)Restricting the ability of its agents to sell the products.
(ii) Significantly increasing the expenses due to changes in laws and regulations and investing in new methodologies to overcome the restrictions brought in to address the spread of COVID-19 and the adverse changes in population mortality/morbidity or utilisation behaviours.
(iii)Adversely affecting its investment portfolio.
(iv)Adversely affecting its operational effectiveness.
- Segregation of the single consolidated ‘Life Fund’ of the Corporation into two separate funds, viz., a participating policyholders’ fund and a non-participating policyholders’ fund, effective 30 September 2021 may adversely affect the business, financial condition, results of operations and cash flows.
- LIC is in breach of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 (“SEBI MF Regulations”), which prohibit any shareholder from holding 10% or more of the shareholding or voting rights in any asset management company. Or the trustee company of a mutual fund from holding, directly or indirectly, 10% or more of shareholding or voting rights in the asset management company or the trustee company of any other mutual fund.
If you are interested in this investment opportunity, make sure to conduct thorough research before subscribing to the LIC IPO. To ensure a seamless experience while subscribing to LIC IPO, read on how to subscribe to an IPO.