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The Saga of Largest IPO in India : 

LIC’s Initial Public Offering


Life Insurance Corporation of India (LIC) is an Indian statutory insurance and investment corporation headquartered in the city of Mumbai. It was established on 1 September 1956, when the Parliament of India passed the Life Insurance of India Act that nationalized the insurance industry in India. The 66 year old company dominates the India’s insurance industry with more than 280 million policies. LIC, one of the country’s largest company in terms of revenue and assets, has got good customer service and a strong claims settlement record & with a Rs 5cr initial equity contribution, it generates Rs 3.5 to 4 lakh crore in annual surpluses & distributes Rs 2600-2700 cr annually to the government.

The country is going to witness an important historic moment as LIC is heading towards making its first debut in the stock market. Government is planning to sell 5% stake of its equity for  Rs 65000cr. It is presumed that the government will raise more than Rs 65000cr through this IPO by offering 316.25 million shares to the public. The IPO of LIC is described as India’s  Aramco owing to its sheer size. This IPO is an OFS(Offer for Sale) by Government of India and no fresh issue of shares is done. The LIC is looking forward to raise more money than all the cumulative IPOs of 2021. In order to address the privatisation concerns, the central government introduced provisions in the LIC act that requires the government to hold a minimum of 75% stake for 5 years after the IPO & 51% stake thereafter.  LIC filed its Draft Red Herring Prospectus (DRHP) with the market regulator Securities and Exchange Board of India (SEBI) on 13th February, 2022. After listing, the insurer is likely to become the top three most valued stocks in the country. The Centre plans to reserve 10% of its IPO for LIC’s policyholders subject to the value of the allotment of equity shares not exceeding Rs 2 lakh. To inform its policyholders about this, LIC had started a campaign named ‘It’s best in life to be prepared’ asking them to upload their personal details and link their Pan card with policy and to open a demat account. LIC is also giving opportunity to its policyholders to revive their lapsed policies before March 25, 2022. LIC has also reserved up to 35% of its total IPO size for retail investors.

The 66 year old LIC’s IPO journey had been very challenging despite being a dominant insurer. Today, with  US$520 million (about Rs 40 lakh crore) in Assets Under Management, LIC is the largest institutional investor in Indian markets. The seven stocks that kept LIC’s equity portfolio stable over the last eight years are Reliance Industries, Tata Consultancy Services, Infosys, ITC, ICICI Bank, State Bank of India and Larsen & Toubro.  The shares of insurance firms in the market are valued on the basis of their EmbeddedValue (EV) and expected growth in new businesses. LIC’s EV value is nearly Rs 5 lakh crore. As per the latest Crisil report, LIC offers the highest Return on Equity (ROE) at 82% apart from being the third largest in terms of life insurance premium.

Earlier, the IPO launch was scheduled for March 2022 but now the government extended it till May 2022 owing to the market volatility because of Russia-Ukraine conflict. Also there’s a growing fear among other insurers that their shares will be affected owing to LIC’s IPO. It is believed that the insurance behemoth will emerge as the third most valuable company in the country after Reliance Industries and TCS. The entire country is patiently waiting for the ultimate day of listing and it is presumed that this IPO will fetch more returns than any other IPOs till date in the Indian history.

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