Life Insurance Corporation of India (LIC)'s IPO, considered to be the largest initial public offering (IPO), is expected to open in March, believe various market experts. Even, the department of investment and public asset management (DIPAM) secretary Tuhin Kanta Pandey said that state-insurer that the IPO is expected to take in the fourth quarter of the current fiscal year, while addressing at the CII Global Economic Policy Summit 2021.
Government of India has been encouraging Indian citizens and foreign investors to invest in the upcoming LIC IPO. The insurer filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (Sebi) on Sunday, January 13. LIC has mentioned about various trend indicators one should look for before investing in its IPO.
With just a few days for the IPO to open, here are ten things you need to know about LIC IPO.
1. Why Is It Likely To Open In March?
The IPO is likely to open in March because the Fed starts its rate hike from March as signalled in its last two meets, said various experts. This will spoil the market mood across the globe. “Considering the monster size of the (LIC) IPO, the government would not like to take any chance with market volatility post the Fed meet,” the head of research of a broking house told Outlook Money, on the condition of anonymity.
2. Government Is Taking All Possible Initiatives
The government of India is taking all the possible measures to ensure LIC IPO is a success. The authority has been sending personal text messages to people and publishing advertisements in newspapers to ensure maximum people get to know about the IPO and invest in it. As per the economic agenda of the state, the government aims to raise between Rs. 40000 crore and Rs 1 lakh crore this quarter through this IPO.
3. Foreign Investment Is Welcomed
To ensure maximum participation from foreign investors in LIC IPO, the commerce and industry ministry has made some amendments in the foreign direct investment (FDI) policy.
4. Favourable Monetary Policy
Many market experts believe that the Reserve Bank of India (RBI) has kept the repo rate and reverse repo rate unchanged as it does not want to spoil the market mood as India’s most extensive IPO of insurance behemoth LIC is likely to come soon.
5. The Risk Factors
Before investing in its IPO, LIC has mentioned in its DRHP to consider various external and internal risks, the company is facing. Even some of their own operations impose a challenge to their business, while many challenges are imposed due to the government regulations as well. (Read more here)
6. What Is There For Policy Holders
No special provision, such as discount in the share price, has been announced for LIC policyholders. “The aggregate of reservations for eligible policyholder(s) shall not exceed 10 per cent of the offer size,” the DRHP stated in its latest release. The size of each share has not been disclosed so far. But those who want to participate need to update their details.
7. Newly Appointed Directors
Recently, LIC appointed six independent directors on its board to meet regulatory norms of corporate governance. LIC appointed former financial services secretary Anjuly Chib Duggal, ex-SEBI member G Mahalingam, former SBI Life managing director Sanjeev Nautiyal, sources said. Besides, chartered accountants MP Vijay Kumar, Raj Kamal, and V S Parthasarathy are roped in as independent directors on LIC's board.
8. Huge Unclaimed Funds
As per the DRHP), the unclaimed amount was at Rs 18,495 crore at the end of March 2021 and Rs 16,052.65 crore at the end of March 2020.
9. Will Remain IDBI Bank Shareholder
LIC clarified that it would like to retain some stake in IDBI Bank so that the insurer continues to reap the benefits of the bancassurance channel. IDBI Bank became a subsidiary of LIC with effect from January 21, 2019, following the acquisition of an additional 8,27,590,885 equity shares.
10. Campaign For Lapsed Policies
LIC has also launched a campaign for revival of individual lapsed policies. Policies, which are in a lapsed condition during the premium paying term and not completed policy term, are eligible to be revived in this campaign that began from February 7 and will be there till March 25, 2022.