Things to Remember while applying for LIC IPO as a Policyholder

February 28, 2022, has been marked as a cutoff date by the Life Insurance Corporation of India (LIC) for its policyholders to update their details in the policy records. Only the policyholders who update the details within the stipulated period will be eligible to participate in its upcoming public issue.

The insurance firm on February 13 submitted the draft papers with the Securities and Exchange Board of India (SEBI) for the proposed sale of a portion of its stake. Since then, the business channels and newspapers have been filled with IPO news.

Details Extracted from DRHP

The proposed IPO of LIC is expected to launch in the market by March and the entire sale of the government’s 5 pc stake would be over 31 crore shares. The estimated value of this stakeholding comes to around Rs. 63,000 crores. As part of its preparations for the IPO, the insurance firm has asked its policyholders to update their details in their policy records at the earliest.

As per the company’s draft red herring prospectus (DRHP), a person who has not updated his or her PAN details within two weeks from the date of its filing of the draft prospectus will not be considered as an eligible policyholder. LIC has eased the process of updating PAN by making it available online as well as offline. LIC policyholders can simply go to the website or contact the insurance agent for completion of this process.

Eligible LIC Policyholders

It further stated that those with one or more policies of LIC would be eligible to apply for this offer. The policyholder must also be a resident of India. A maximum of 10% of the total offer has been reserved for the policyholders. The portion of the offer that’s available on a proportionate basis will be subject to the approval of the government.

Only the eligible policyholder will be allowed to apply in the reserved category of 10% shares. In the year 2021, LIC issued over 21 million individual policies. It accounted for around 75 pc of new policies issued.

IPO Details

The government holds a huge stake in LIC but only 5% of the stake is being offered. The IPO is for sale by the Government of India. The proceeds from the sale of these shares will be used to fund its operations. The initial public offer of LIC is expected to be the biggest ever in India’s stock market history. The IPO of LIC is expected to be concluded in March. The proceeds are likely to be used to meet the government’s disinvestment goal of about Rs 78,000 crore.

LIC’s Performance

LIC’s share capital was raised to over Rs 6,325 crore in September last year to facilitate its IPO. For H1 FY 2021-22, the insurance firm reported a profit after tax of over Rs 1,437 crore. Its new business premium grew at a robust rate compared to Rs. 6.14 crore of the first half of the previous year.

However, the valuation of private insurance companies like HDFC Life and ICICI Prudential are higher compared to the LIC.

FAQs

What action are LIC policyholders supposed to take to become eligible?

The existing policyholders of the LIC are required to update PAN details in their policy. Upon update of this detail, the policyholder will become eligible to apply for the IPO under the reserved category.

Who is an eligible policyholder?

To be eligible to apply for the LIC IPO under the reserved 10% portion for the policyholders, you need to be an eligible policyholder. A policyholder holding one or more policies with the LIC, who is also a resident of India, shall be considered an eligible policyholder.

What is the last date to update the PAN details in LIC policy to be eligible for IPO?

As per the LIC’s draft red herring prospectus, the LIC has sought the policyholders to update PAN details before the end of two weeks from the date on which DRHP was filed with the SEBI. Since the DRHP was filed on 13th February, the last date to update PAN details is 28th February.

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.