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LIC IPO | Insurer to keep up to 10% of issue size for policyholders and at discount

Only eligible policyholders who have updated their PAN by February 28, 2022 can apply under policyholder's quota.

February 15, 2022 / 04:41 PM IST
Representational image

Representational image


The Life Insurance Corporation of India (LIC) is likely to create policyholder and employee quotas and offer them discount, as per its much-awaited draft red herring prospectus (DRHP) filed on February 13.

The DRHP does not specify the offer size, but the central government will offload 31.6 crore shares, or 5 percent of its stake in the company.

Also read: LIC IPO: Govt files draft papers with SEBI for mega listing; all eyes on March launch

The portion planned to be reserved for policyholders can go up to maximum of 10 percent. “The aggregate of reservations for eligible policyholder(s) shall not exceed 10% of the offer size,” the DRHP stated. Employee quota will be capped at 5 percent. The quantum of potential discount will be specified closer to the bid opening date, at least two working days prior.

Also read: LIC invites its policyholders to become shareholders by updating Pan and Demat details   

Individual, resident Indian policyholders with one or more LIC policies as on the date of DRHP and bid/offer opening date will be eligible to apply under this reserved portion. The maximum bid per policyholder is capped at Rs 2 lakh. Policyholders who fail to update their PAN details by February 28, 2022 will not be eligible for this quota.

LIC has nearly 29 crore policyholders and commands a market share of 61.6 percent in new business premium collections as on January 2022. The policyholders’ quota in the IPO – a first-of-its-kind – was created after the central government permitted LIC to designate policyholders as one of the reserved categories, as per an amendment made last year to the LIC Act, 1956.

Also read: The art and science of valuing an insurer’s growth potential  

The insurance behemoth has, since last year, been running campaigns to get policyholders to update their PAN details in its records. “This is very important from a KYC perspective as well as your ability to participate in the proposed public offering by the LIC…this will be used to help you participate in the proposed offering,” the ad said. It also outlined the process for updating PAN details online through LIC India‘s portal. Policyholders will have to enter their PAN, policy number, date of birth and email ID. Those not conversant with the online mode can complete the process through their agents. It had also made it clear that having demat accounts is a pre-requisite for participating in the public offer.

Also read: How LIC IPO has pushed a race for new demat accounts

LIC has a massive 61.4 percent market share of new business premiums in the life insurance space as of December 31, 2021 (data from insurance regulator IRDAI). This is 1.59-times the market share of the entire private sector life insurers. Compared to the second-largest insurer SBI Life, LIC's market share is 6.7-times. However, it is also a fact that the company has been continuously losing market share, which could be a drag on its valuation, say analysts.
Preeti Kulkarni is a financial journalist with over 13 years of experience. Based in Mumbai, she covers the personal finance beat for Moneycontrol. She focusses primarily on insurance, banking, taxation and financial planning
first published: Feb 13, 2022 08:42 pm