Cart

close

All courses includes the following

LIC IPO to soon bring smiles on the faces of investors

images

Is the wait over? LIC IPO to soon bring smiles to the faces of investors 

You must have often heard people saying "good things take time". Well, the LIC IPO seems to have taken this quote quite seriously!

The news of LIC launching its IPO has been floating around for almost a year now. In 2020 the investors just kept on anticipating but it did not hit the market. Nevertheless, while announcing the Budget for 2021, the Finance Minister Nirmala Sitharaman made it clear that the LIC IPO will definitely be launched in FY 2021.

For the investors who have been eagerly waiting for this IPO, your wait is almost over. There are some updates that have been announced regarding the LIC IPO that is pivotal for you to know before you make your mind to place your bet.

Intrigued to know about these updates and related details?

Let us get started!

Turning the wheel of time: How LIC came into existence

The History of LIC

The idea of "life insurance" was introduced to Indian citizens around the year 1818. It was when the first life insurance firm, Oriental Life Insurance Company (originally started by Europeans) was established in Calcutta. The sad part is that whatever life insurance firms were started during that time, they all catered to the needs of Britishers and not the natives of our country.

Thanks to the efforts of some eminent figures like Babu Muttylal Seal and the popular Swadeshi Movement (1905-1907), we started our own life insurance firms to facilitate the financial protection of our people. One of the first such firms to be established was Bombay Mutual Life Assurance Society which aimed at averting the consequence of any unprecedented happenings taking place in the lives of people.

Finally, in 1956, Life Insurance Corporation came into existence with the merger of over 245 provident societies as well as insurance firms. In fact, to date, it is one of the top life insurers with a market share of 66.22% (as per 2019-20).

It is now time to understand the operational structure of LIC within the country. 

Organisational Structure of LIC

The Life Insurance Corporation of India is headquartered in the financial capital of India, Mumbai. If you ask about its major presence then it carries out its operations through 8 zonal offices that are present in the following cities.

Image 2

Apart from zonal offices, LIC owns 113 divisional offices. It has more than 2,000 branches and lakhs of agents who tirelessly work to provide you financial immunity with a plethora of insurance plans as well as investment products. The company’s focus lies in protecting the interest of its insurance holders.

Don’t get surprised by the next fact that I am going to tell you!

LIC India is one of those home-grown financial institutions which has a presence outside of India too. It marks its international presence in 14 nations. Examples include the UK, Oman, Qatar, Sri Lanka, Bangladesh, Nepal, Fiji, Mauritius, Singapore, etc. In these 14 nations, LIC has either inked its presence through the presence of joint venture companies or subsidiaries.

So, the next time you travel to the UK or Nepal, don’t get startled when you find a LIC branch or its subsidiary!

LET US HAVE A LOOK AT THE LIC FINANCIALS

If you talk about the growth of the Life Insurance Corporation of India in the span of over 64 years of its inception, then it has been impressive. The growth is aided by the range of products that it has to offer like - micro insurance plans, health insurance plans, special plans, pension plans etc. 

I mean, as far as the variety is concerned you certainly would not face disappointment with LIC’s list of products.

Now, if you are a part of the investing community, then you would certainly be aware of the importance of the financial stability of any company. It's a very simple proportional relationship – the more financially stable a company, higher are the chances of future growth, and better are the returns that investors can expect. 

Image 3

So, before you make your mind to place your bet on the upcoming LIC IPO, take a look at the main financial highlights.

Image 4

As of March 2020, the new businesses that LIC forayed into posted a growth of 25.17%.

During 2019-2020, LIC’s Pension and Group Superannuation Business was one of the segments that outperformed. It ended up collecting Rs 1,26,696.21 crores as part of the new business premium income and grew by 39.46% as compared to 2018-19. By the end of March 2020, LIC had successfully collected total premium income worth Rs 3,79,062.56 crores. Yet again, this figure jumped by 12.42% as compared to the year 2018-19.

Further, its Total Policy Payouts and Total Gross Income stood at Rs 2,54,222.27 crores and Rs 6,15,882.94 crores. On one hand, the Total Policy Payouts grew by then 1.31%, on the other hand, Total Gross Income posted a handsome surge of 9.83% as compared to 2018-19. 

Particulars

As Of 2019

As Of 2020

Net Retention Ratio

99.10%

99.10%

Investment Yield

7.59%

7.44%

Net NPA

0.27%

0.79%

Gross NPA

6.15%

8.17%

After analyzing the charts and graphs you will come to the conclusion that the financials of LIC are fair according to prevailing market conditions. At the same time, it has been losing its market share to some of the private players in the life insurance industry. Thus, if you wish to invest in the IPO then you need to keep track of its financial performance.

But, is it good enough to lure investors towards the upcoming initial public offering?

You can decide for yourself after knowing the details of the IPO in the following part!

A SNEAK PEAK AT THE LIC IPO DETAILS

Due to the anticipation that surrounds the LIC IPO, many investors have been eager for its launch. As I mentioned in the former part, during the Budget announcement of 2021, it has been made clear that the public offering will surely be issued during the next fiscal.

So, the reason for the celebration is here!

Finally, you have certainty about it.

By launching the LIC IPO, the government of India aims to dilute a part of its stake in the company. The experts are predicting that the government will be selling around 10% (or less) of the stake it owns in LIC. The other details, such as LIC IPO price, LIC IPO issue size, LIC shares face value, etc. are still undecided.

If you go by the speculations then, based on the assumption of 10% stake dilution, the size of IPO could be around Rs 80,000 crores – Rs. 1 lakh crores. Now, if these expectations turn out to be true then we will see the biggest IPO in India.

I would like to remind you that this is expected data and the clear details will be released after the government officially quotes the value.

Well, do not get disappointed with the limited details about the IPO because there are certain updates declared in this regard that will surely make your lips curl into a smile.

Keep reading for more on these updates!

MAJOR LIC IPO UPDATES

Soon after the investors learned about the LIC IPO news, the Minister of State for Finance, Anurag Thakur has issued a new update.

Do you or any of your friends hold any LIC policy?

If the answer to this question is yes then you must know that the government has proposed to keep around 10% of the IPO size reserved for the people who are LIC policyholders.

This is excellent news indeed!

Are you happy now?

You must be!

Further, the government will continue to be the majority shareholder and will hold on to its managerial position. The step has been taken so that the government can take utmost care of the interests of LIC policyholders.

CONCLUSION

Life Insurance Corporation of India is that financial institution which has been the part of India’s legacy for more than six decades now. So, this fact makes the upcoming LIC IPO even more valuable.

Owing to its longstanding trust among the common people, the LIC IPO has the potential to outperform other IPOs that have surfaced in the Indian market. The experts have estimated that a massive number of investors are expected to participate in the upcoming LIC IPO.

But till then, don’t forget to do your homework.

Simply, keep track of the quarterly and annual financial reports to analyze the growth trajectory of LIC India and keep investing!

 

If you liked reading about the LIC IPO, please share the article with your friends and family so that they, too, can learn about the recent updates that have been announced.

 

Begin your investing journey today, by creating a free demat account with Upstox, India's fastest growing brokerage platform. Register here to get started.

Did you enjoy what you read? Subscribe to our newsletter and get content delivered to you at your fingertips!!

author

Shivani