Life Insurance Corporation of India (LIC) on Wednesday informed its policyholders in India about some of the pre-requisites for investing in its proposed initial public offer (IPO) – updating their PAN details and opening demat accounts.
On February 13, the state-run insurer filed draft papers with capital market regulator SEBI for the sale of a 5 per cent stake by the government for an estimated Rs 63,000 crore. The initial public offering (IPO) of over 31.6 crore shares or 5 per cent government stake is likely to hit the market in March and employees and policyholders of the insurance behemoth would get a discount over the floor price.
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Indians have been used to the Life Insurance Corporation of India’s (LIC) advertisements in newspapers and on television sets exhorting them to buy policies.
Now, the life insurance behemoth has placed an advertisement of a completely different kind.
Update your PAN
The finance ministry has indicated that up to 10 percent of LIC’s IPO issue size could be reserved for its policyholders. The government has permitted LIC to designate policyholders as one of the reserved categories in any LIC public offering in the future, as per an amendment made this year to the LIC Act, 1956. “In order to participate in any such public offering, policyholders will need to ensure that their PAN details are updated in the Corporation’s records,” the advertisement said.
In fact, the life insurance major has been running campaigns urging policyholders to update their PAN 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. You will have to enter your PAN, policy number, date of birth and email ID. If you are not comfortable with the online mode, you can approach your agent to complete the process. “LIC wants to ensure that its policyholders are KYC-compliant, and therefore eligible to apply for IPO. In case there is any reservation for policyholders, then they should not miss it. However, the risks involved in investments should have been explained in detail in the ad,” says Pankaj Mathpal, Founder, Optima Money Managers.
Demat a must to invest
If you do not have a demat account, you can consider opening one if you are keen to invest in LIC’s IPO or capital markets in general. You need to this invest in any IPO or listed stock. “Policyholders should know the risk of investing in shares and avoid it if it doesn't suit the objective of their investment. Demat account is not very expensive now, it still doesn't make sense if they want to invest only in LIC’s IPO,” says Pankaj Mathpal, Founder, Optima Money Managers. If you are an extremely conservative investor who has never invested in equity markets, you need to tread carefully. “LIC has a huge customer base and a great reputation. People would invest in anything LIC, so it’s important that they understand the risks that come with equity. I would recommend investment in LIC IPO in future provided the price is right, time horizon is long-term and they have a diversified portfolio,” says Shweta Jain, Founder, Investography.
Now, you can do your homework, assess your needs and risk appetite before opening a demat account. However, you must ensure that your PAN is updated in LIC’s records irrespective of whether you wish to invest in its IPO or not.
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