LIC IPO: Expected price band, market share, financials; 10 things to know

Country’s biggest institutional investors Life Insurance Corporation of India (LIC) filed its draft red herring prospectus (DRHP) on Sunday for its initial public offering (IPO). As per the DRHP, the insurance behemoth will have up to 31,62,49,885 (31.62 crore) equity shares of the face value of Rs 10 on offer through the offer for sale (OFS), representing 5 per cent of equity stake. Shares of LIC are proposed to be listed on leading stock exchanges including the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Here are 10 things you should know about the IPO.

Embedded value: The DRHP also disclosed the LIC’s embedded value at Rs 5,39,686 crore as of September 30, 2021. For life insurers, one of the most effective ways of calculation is through Embedded Value (EV) to arrive at their IPO value. The EV is the sum total of the present value of all future profits from existing business plus net worth, which includes capital.

Face value: LIC has fixed a face value of Rs 10 each. The insurance major will announce the price band and discount to eligible employees and policyholders later after consultation with the book-running lead managers (BRLMs).

Reservation of shares: According to the DRHP, the offer may include a reservation for eligible employees and policyholders. The DRHP does not give any clarity on reservations or discounts for policyholders. Reports suggest that reservations for policyholders and employees cannot exceed 10 per cent and 5 per cent, respectively.

Book-running lead managers: Kotak Mahindra Capital Company, Axis Capital, BofA Securities, Citigroup Global Markets, Nomura Financial Advisory, Goldman Sachs (India) Securities, ICICI Securities, JM Financial, JP Morgan India Private Limited and SBI Capital Markets are the book-running lead managers for the issue. On the other hand, KFin Technologies Private Limited is the registrar to the offer.

Expected price band: The expected value per share will range from 2,560 to Rs 3,413 for the multiple of 3x and 4x, respectively. At the conservative multiple 2x and 2.5x, the value per share comes to Rs 1,706 and Rs 2,133, according to a report by Business Today.

Read more: LIC IPO could be priced in the range of Rs 1,700 to Rs 3,500

Objects of the offer: The object of the public offer is to achieve the benefits of listing the equity shares on the stock exchanges and carry out the offer for sale of up to 316,249,885 equity shares by the selling shareholder. The selling shareholder (President of India acting through the Ministry of Finance, Government of India) will be entitled to the entire proceeds of the offer after deducting the offer expenses and relevant taxes thereon. LIC will not receive any proceeds from the public offer. At present, President of India holds 100 per cent or 6,32,49,97,701 of LIC.

Financials: The insurer posted a profit after tax of Rs 1,504 crore for the first six months ended September 30, 2021. The figure stood at Rs 2,974.14 crore and Rs 2,710.48 crore in FY21 and FY20, respectively.

Assets Under Management (AUM): LIC is the largest asset manager in India with managed assets worth Rs 36.8 lakh crore as of March 31, 2021. LIC’s AUM as of March 31, 2021 is more than 3 times higher than the total AUM of all private life insurers in India, and is approximately 16.6 times more than the AUM of the second-largest player in the Indian life insurance industry (SBI Life had the second-largest AUM of approximately Rs 2.2 lakh crore), and is also 1.2 times the AUM of the entire mutual fund industry in India, which had an AUM of approximately Rs 31.4 lakh crore as of March 31, 2021.

Focus on technology: As at September 30, 2021, LIC’s portal had 17.58 million registered users and the corporation’s mobile app for policyholders, available on both Android and iOS platforms, had 5.1 million registered users. “We spent Rs 177.43 crore, Rs 424.40 crore, Rs 361.42 million and Rs 67.92 crore on information technology, on a consolidated basis, in FY 2019, FY2020, FY2021 and the six months ended September 30, 2021, respectively," the DRHP said.

Market share: LIC had a market share of 62.5 per cent and 62.9 per cent, compared to 8.5 per cent and 8 per cent market share of the second-best player in the market by renewal premium for fiscal 2021 and the six months ended September 30, 2021, respectively, the DRHP said.