LIC IPO | Life insurer’s rising appetite for passive investment products

LIC | Representative image

The Life Insurance Corporation (LIC) of India is stepping up its investments in passive products like exchange-traded funds, the life insurer’s draft papers for its initial public offering show.

LIC on February 13 filed its draft red herring prospectus with the Securities and Exchange Board of India, seeking the regulator’s approval to bring the largest ever IPO to the Indian primary market.

The state-run insurer invested Rs 12,221 crore in exchange-traded funds (ETFs) in the first six months of the current financial year, higher than the Rs 10,062 crore it invested in all of 2020-21, the DRHP shows.

The quantum of funds invested in passive products has increased nearly four times over the past two and a half years. In 2018-19, LIC invested Rs 3,080 crore in ETFs.

That said, the share of investments in venture funds, mutual funds and ETFs was only at 0.78 percent of the overall assets of LIC as of September 30, 2021.

Also read: LIC issue size could range from Rs 53,500 crore to Rs 93,625 crore; issue price may be Rs 1,693-2,962 per share

The rise in LIC’s investments in ETFs comes alongside rising interest in such products by investors as well as the increased use by the government of ETFs to sell stake in state-owned enterprises.

The government has over the past few years raised funds through multiple tranches of the CPSE ETF and Bharat Bond ETF. The government’s move came amid higher interest among investors for such products given their lower cost.

The assets under management of ETF in India has risen to Rs 3.9 lakh crore as of January 31, 2022 from Rs 1.34 lakh crore at the end of March 31, 2019.