Goodwill’s Eagle Eyes !
LIC of India Mega IPO soon. Grab the opportunity !
Government proposes to hike LIC authorised capital to Rs 25,000 cr
The Life Insurance giant, LIC of India is coming out with their mega IPO in a few months, the process for which has already started and will soon be filing the red-herring Prospectus with SEBI. The response for the divestment initiative of this company is expected to be huge as LIC is still the market leader despite the entry of many Private sector Life insurance companies. Its policy premium collections are still better than others.
Currently, the paid-up capital of the life insurance company with over 29 crore policies is Rs. 100 crore.
The government has proposed to significantly increase the authorised capital of Life Insurance Corporation of India (LIC) to Rs. 25,000 crore so as to facilitate its listing slated for the next fiscal.
LIC which started in 1956 with an initial capital of Rs. 5 crore has an asset base of Rs. 31,96,214.81 crore.
As per the amendments proposed in the Life Insurance Corporation Act, 1956 the authorised share capital of LIC is Rs. 25,000 crore divided into 2,500 crore shares of Rs. 10 each.
The amendments proposed as part of Finance Bill 2021 will lead to the setting up of a board with independent directors in line with listing obligations. According to one of the 27 proposed amendments, the central government will hold at least 75 per cent in LIC for the first five years post the IPO, and subsequently hold at least 51 per cent at all times after five years of the listing. Up to 10 per cent of the LIC IPO issue size would be reserved for policyholders, Minister of State for Finance – Anurag Thakur had said on February 9, 2021. The government will remain the majority shareholder and will continue to retain management control, safeguarding the interest of policyholders, he had said.
In her Budget Speech 2021, Finance Minister Nirmala Sitharaman stated that the initial public offering (IPO) of LIC would be launched in the next financial year, beginning April 1, 2021.
Currently, the government owns 100 per cent stake in LIC. Once listed, it is likely to become the country’s biggest company by market capitalisation with an estimated valuation of Rs 8-10 lakh crore.
The Department of Investment and Public Asset Management (DIPAM), which manages the government’s equity in state-owned companies, has already selected actuarial firm Milliman Advisors for ascertaining the embedded value of LIC for meeting the government’s disinvestment target.
Deloitte and SBI Caps have been appointed as pre-IPO transaction advisors.
The Budget 2021-22 has set a disinvestment target of Rs. 1.75 lakh crore, higher than the Rs. 32,000 crore estimated to be garnered in the current fiscal. Of the Rs. 1.75 lakh crore, Rs. 1 lakh crore is to come from selling government stake in public sector banks and financial institutions, and Rs. 75,000 crore would come as CPSE disinvestment receipts.
Why and How LIC IPO is attractive?
- LIC of India is the Leader in Life Insurance Business in India with 71 % market share.
- LIC gets the highest Premium Collection from Investors.
- It is fully owned by GOI now and even after the IPO GOI will be major stakeholder.
- It services 29 Crore policy holders, has 2048 Branch offices and employs 12 L Agents.
- LIC has the best claim settlement in the
- Up to 10% of the LIC IPO would be reserved for policyholders.
- The Issue is expected to hit the market in Oct 2021.
- Although the pricing of the Rs. 10 Face value of the shares is yet to be known, the GOI will offer it at an attractive premium with a scope for the Investors to gain substantially on listing. Hence short term gains are expected.
Mobilize your savings for the LIC IPO, wait and apply when the issue opens.
You can now apply through Goodwill’s online Portal for hassle free procedures.
For any query please contact Goodwill Wealth Management.