LIC reserves up to 10% of issue size for policyholders in its IPO

The Life Insurance Corporation of India (LIC) has confirmed its plans to create policyholder and team member quotas and offer them discount to issue prices in its much-awaited draft red herring prospectus (DRHP) filed on February 13.

The DRHP does not specify the offered size, but the central government will offload 31.6 crore shares or 5 percent of its stake in the company.

The portion reserved for policyholders can go up to a maximum of 10 percent. “The aggregate of reservations for the eligible policyholder(s) shall not exceed 10% of the offered size,” the DRHP stated. Employee quota is capped at 5 percent. The quantum of discount will be specified closer to the bid opening date, at least two days prior.

Individual, resident Indian policyholders with one or more LIC policies as of the date of DRHP and bid/offer opening date will be eligible to apply under this reserved portion. The maximum bid per policyholder has been capped at Rs 2 lakh. Policyholders who fail to update their PAN details by February 28, 2022, will not be eligible for this quota.

LIC has nearly 29 crore policyholders and commands a market share of 61.6 percent in new business premium collections. The policyholders’ quota in the IPO – a first-of-its-kind – was created after the central government permitted LIC to designate policyholders as one of the reserved categories, as per an amendment made last year to the LIC Act, 1956.

The insurance behemoth has, since last year, been running campaigns to get policyholders to update their PAN details in its records. “This is very important from a KYC perspective as well as your ability to participate in the proposed public offering by the LIC…this will be used to help you participate in the proposed offering,” the ad said. It also outlined the process for updating PAN details online through LIC India’s portal. Policyholders will have to enter their PAN, policy number, date of birth, and email ID. Those not conversant with the online mode can complete the process through their agents. It also clarified that having Demat accounts is a prerequisite for participating in the public offer.

LIC has a massive 61.4 percent market share of new business premiums in the life insurance space as of December 31, 2021 (data from insurance regulator IRDAI). This is 1.59-times the market share of the entire private sector life insurers. Compared to the second-largest insurer SBI Life, LIC’s market share is 6.7-times. However, it is also a fact that the company has been continuously losing market share, which could be a drag on its valuation, say analysts.

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