Mega IPO! LIC files draft papers with Sebi for initial public offering, govt to offload 5% stake via offer for sale

14 Feb 2022 , 04:16 PM

The most-awaited IPO in the market has finally filed its draft papers with market regulator Sebi. The largest and oldest insurer of India, Life Insurance Corporation of India (LIC) has filed Draft Red Herring Prospectus (DRHP) with the market watchdog to launch their initial public offering which is will be purely an offer for sale with the government offloading a certain portion of their stake in the company.

As per the DRHP, LIC will offer 316,249,885 equity shares as an offer for sale having the face value of Rs10 each under the IPO. The President of India acting through the Ministry of Finance, Government of India will be the selling promoter in the issue.

Currently, the government holds a 100% stake or over 632.49 crore equity shares in the LIC. The more than 31.6 crore equity shares that are set to be offered in the IPO accounts for only 5% of the total stake held by the Centre in LIC.

The objects of the Offer are to (i) achieve the benefits of listing the Equity Shares on the Stock Exchanges; and (ii) 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. Our Corporation will not receive any proceeds from the Offer.

Details of the price band, offer size in value terms, employee discount and reservation, policyholders reservation portion, investors reservation portion, issue opening date and closing – are some of the factors that will be disclosed in due course.

Under the DRHP, it has been highlighted that the IPO may include reservation of up to certain equity shares for eligible employees and policyholders of LIC.

Book running lead managers for the IPO are – Kotak Mahindra Capital Company, Axis Capital, BofA Securities India, Citigroup Global Markets India, Goldman Sachs (India) Securities, ICICI Securities, JM Financial, Nomura Financial Advisory and SBI Capital Markets.

LIC has been providing life insurance in India for more than 65 years and is the largest life insurer in India, with a 64.1% market share in terms of premiums (or GWP), a 66.2% market share in terms of New Business Premium (or NBP), a 74.6% market share in terms of a number of individual policies issued, an 81.1% market share in terms of the number of group policies issued for Fiscal 2021, as well as by the number of individual agents, which comprised 55% of all individual agents in India as at March 31, 2021. LIC had the highest gap in market share by life insurance GWP relative to the second-largest life insurer in India as compared to the market leaders in the top seven markets globally, as per the CRISIL report.

There are currently 24 life insurance companies in India, with Life Insurance Corporation being the sole public player. The size of the Indian life insurance industry was Rs6.2 trillion on a total-premium basis in Fiscal 2021, up from ₹5.7 trillion in Fiscal 2020. The industry’s total premium has grown at 11% CAGR in the five years ended Fiscal 2021.

CRISIL Research forecasts the industry’s total premium to grow at 14-15% CAGR over the next five years, to reach close to Rs12.4 trillion by Fiscal 2026