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TMI Blog‘IPO’ JOURNEY OF ‘LIC’ OF INDIAX X X X Extracts X X X X X X X X Extracts X X X X ..... ‘IPO’ JOURNEY OF ‘LIC’ OF INDIA - By: - Mr. M. GOVINDARAJAN - Other Topics - Dated:- 16-7-2024 - Introduction The Life Insurance Corporation of India ( LIC for short) was established on 01.09.1956 under the LIC Act by merging 245 private life insurance companies and provident fund societies in India. The Government of India passed the LIC Act on 19.06.1956. The LIC was formed with a capital contribution of Rs.5 crore from the Indian Government The nationalization of the life insurance business in India was a result of the Industrial Policy Resolution of 1956, which had created a policy framework for extending state control over at least 17 sectors of the economy, including life insurance. LIC has been providing life insurance in India for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than 65 years and is the largest life insurer in India, with a 64.1% market share in terms of premium (or GWP), a 66.2% market share in terms of new business premium (or NBP), a 74.6% market share in terms of number of individual policies issued, a 81.1% market share in terms of number of group policies issued for Fiscal 2021, as well as by the number of individual agents, which comprised 55% of all individual agents in India as at March 31, 2021. Till date LIC issued 2.04 crore policies. LIC s journeys major highlights Parliament enacted LIC Act and LIC was established; 1970 LIC business crossed 1000 crores; 1986 Rs.7000 crore crossed in sum assured on new policies; 1989 LIC Mutual fund launched; 2007 LIC Pension Fund launched; 2012 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingapore subsidiary was established; 2015 Social Security schemes like Atal Pension Yojana launched; 2019 Acquired 51% of stake in IDBI; 2020 Budget announcement of LIC IPO plans; 2022 LIC filed draft Red Herring Prospectus for IPOs. LIC IPO The government revealed plans to launch an initial public offering (IPO) of LIC in its 2020 budget. In Budget speech of 2020-21 , Finance Minister, inter-alia , made the following announcement- Listing of companies on stock exchanges discipline a company and provides access to financial markets and unlocks its value. It also gives opportunity for retail investors to participate in the wealth so created. The Government now proposes to sell a part of its holding in LICI by way of Initial Public Offer ( IP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O for short). The equity share capital of LIC as on 30.09.2021 is Rs.63,249.98 million. The government plans to sell a part of its stake through the IPO. The purpose of this IPO is to ensure more discipline, transparency in the company s operations and give retail investors a chance to invest in the company. An amendment has been made in the LIC Act,1956 to facilitate the roll-out of IPO. The amendment indicates that LIC will become a listed company and prepare quarterly earnings reports and balance sheets. Moreover, any developments within the company will have to be made public post the IPO. The Offer has been authorized by resolution of the Board on 11.02.2022 The Selling Shareholder, through its letter dated February 11, 2022 conveyed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts approval for the Offer for Sale of up to 316,249,885 Equity Shares. Further, the Equity Shares offered by the Selling Shareholder in the Offer are eligible for being offered for sale in the Offer in accordance with Section 5(9)(c) of the Life Insurance Corporation Act. The Employee Reservation Portion shall not exceed 5.00% of our post-Offer Equity Share capital. The Policyholder Reservation Portion shall not exceed 10.00% of the Offer size. LIC has asked its policyholders to update their Permanent Account Number (PAN) and make sure that they have valid DEMAT accounts so that they can participate in the proposed public offer. Global investors including BlackRock and Blackstone have reportedly shown interest in the anchor issue of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed IPO. Mr. Arijit Basu, the former MD of State Bank of India and the former MD and CEO of SBI Life Insurance, has been recruited as a consultant to help with the launch. Deloitte and SBI Capital are among the pre-IPO advisors. Milliman Advisor LLP India, an actuarial firm, is in charge of calculating the embedded value of the company. KFintech, a Hyderabad-based company, has been appointed as registrar and share transfer agent. Meanwhile, Mumbai-based Concept Communications has been chosen as the advertising agency. The public offering is estimated to be around Rs. 70,000 to Rs 1 lakh crore. LIC has an embedded value of Rs 5,39,686 crore as on Sept. 30, 2021. The insurer has for the first time released its embedded value, an actuarial m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easure for valuing a life insurer. The embedded value takes into account the adjusted net worth of the life insurer including free surplus and capital, coupled with the discounted value of future profits from in-force policies. As of September 2021, its assets under management (AUM) stood at Rs 39.6 lakh crore. Out of 18 domestic and international banks, only 10 banks have been selected to manage the IPO. The banks were chosen based on their knowledge of life insurance, marketing strategies, and their experience in retail and international distribution. The draft red herring prospectus was filed on 13.02.2022; The government is offering 31.62 crore shares or 5% of the equity in the IPO, according to the filing with the Securities and Exchan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge Board of India. The Centre aims to come out with the IPO and subsequent listing of LIC on bourses by March 2022. SEBI approval for LIC IPO came on March 9. The number of offer of securities in the IPO is 316,249,885 equity shares of Rs.10/- each. LIC IPO is a book-built issue of Rs 21,008.48 crores. The issue is entirely an offer for sale of 22.14 crore shares. LIC IPO bidding started from May 4, 2022 and ended on May 9, 2022. The allotment for LIC IPO was finalized on Thursday, May 12, 2022. The shares got listed on BSE, NSE on May 17, 2022. Offer for sale - 221,374,920 Equity Shares aggregating up to Rs. [●] million LIC IPO price band is set at Rs.902 to Rs.949 per share. The minimum lot size for an application is 15 Shares. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minimum amount of investment required by retail investors is Rs.14,235. The floor price is 90.2 times of the face value of the equity shares and the cap price is 94.9 times the face value of the equity shares. The issue includes a reservation of up to 1,581,249 shares for employees offered at a discount of Rs 45 to the issue price. A discount of Rs.60/- per equity share is being offered to the eligible policy holders bidding in the policy holder reservation portion. LIC IPO Subscription Status Live LIC IPO subscribed 2.95 times. The public issue subscribed 1.99 times in the retail category, 2.83 times in QIB, and 2.91 times in the NII category by May 9, 2022 (Day 6). Investor Category Subscription (times) Shares Offered Shares Bid for Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount (Rs Cr.) Qualified Institutions 2.83 39,531,236 11,20,68,960 10,635.34 Non-Institutional Buyers 2.91 29,648,427 8,61,93,060 8,179.72 Retail Investors 1.99 69,179,663 13,77,84,060 13,075.71 Employees 4.40 1,581,249 69,49,965 659.55 Others 6.12 22,137,492 13,53,70,965 12,846.70 Total 2.95 162,078,067 47,83,67,010 45,397.03 Source: www.chittorgarh.com/ipo/lic-ipo/1221/ LIC IPO shares offered LIC IPO shares have been allotted on 12.05.2022. LIC IPO is a public issue of 221,374,920 equity shares. The issue offers 69,179,663 shares to retail investors, 39,531,236 shares to qualified institutional buyers, and 29,648,427 shares to non-institutional investors. Category Shares Offered Amount (Rs Cr) Size (%) Anchor Investor 59,296,853 5,627.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 26.79% QIB 39,531,236 3,751.51 17.86% NII 29,648,427 2,813.64 13.39% Retail 69,179,663 6,565.15 31.25% Employee 1,581,249 150.06 0.71% Policyholder 22,137,492 2,100.85 10.00% Total 221,374,920 21,008.48 100% Source: www.chittorgarh.com/ipo/lic-ipo/1221/ Refund LIC initiated the refund to the non-allottees on 13.05.2022. The shares are credited to the demat account of the shareholders to whom LIC shares are allotted on 16.05.2022. Credit of shares to demat account The shares are credited to the demat account of the shareholders to whom LIC shares are allotted on 16.05.2022 LIC IPO listing details Listing date = 17.05.2022 Bombay Stock Exchange script Code= 532526 National Stock Exchange symbol = LICI ISIN = INE0J1Y01017 Final issue price = ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.949/- per share Listing day Trade Information Price Details Bombay Stock Exchange National Stock Exchange Final Price Issue Rs.949/- Rs.949/- Open Rs.867.20 Rs.872/- Low Rs.860.10 Rs.860/- High Rs.920.00 Rs.918.15 Last trade Rs.875.45 Rs.875.25 Source: www.chittorgarh.com/ipo/lic-ipo/1221/ Current value share Share value as on 24.05.2024 is Rs.1029.75. Trade Information Trade volumes (in lakhs) = 37.48 Trade value (in crore) = 386.42 Total market cap (in crore) = 6,49,577.26 Free Float Market Cap (₹ Cr.) 25,983.09 5. I mpact cost 0.03 % of Deliverable / Traded quantity = 32.98% Applicable Margin rate = 16.55 Price Information 52 weeks High (09.02.2024)= 1,175.00 52 weeks low (24.05.2023)= 592.75 Upper band= 1,237.40 Lower band= 82 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.00 Price Band= 20 Financial results of LIC Details FY 2023 FY 2022 FY 2021 FY 2020 Total Revenue 7,92,427.15 7,24,742.92 7,03,732.43 6,45,605.47 Total Revenue growth in % 9.34% (+) 2.99 (+) 9.00(+) 13.10 (+) Total Expenses 7,49,232.25 7,19,091.56 6,90,679.20 6,39,016.55 Total Expenses growth in % 4.19(+) 4.11 (+) 8.08 (+) 12.94(+) Profit after tax (PAT) 35,996.65 4,124.71 2,974.14 2,710.48 PAT growth in % 772.1(+) 38.69 (+) 9.73 (+) 3.16(+) Operating profits margin in % 5.51 0.79 1.90 3.17 Net Profit Margin in% 4.58 0.56 0.43 0.43 Basic EPS (Rs.) 56.91 6.52 4.70 4.29 Source: https://economictimes.indiatimes.com/life-insurance-corporation-of-india/stocks/companyid-5050.cms . Dividend The company declared dividend as detailed below- 25.08.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 022 dividend Rs.1.50 per share. 21.07.2023 dividend Rs.3 per share. 21.02.2024 Interim dividend Rs.4/- per share. The final dividend may be declared at the AGM of the company. There is an increase in the distribution of dividend to the shareholders by the company. Public shareholding norm Shares of the Life Insurance Corporation of India witnessed strong buying in the early morning session as the market regulator Securities and Exchange Board of India granted an additional three years to achieve 10 percent public shareholding norms. After this SEBI relaxation, the new timeline for the insurance behemoth to achieve the shareholding norm is on or before May 16th, 2027. LIC share price target For the year 2024 Month Maximum target Minimum targ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et June Rs 942.26 Rs 835.22 July Rs 955.10 Rs 830.22 August Rs 968.90 Rs 846.07 September Rs 974.91 Rs 840.05 October Rs 985.17 Rs 855.92 November Rs 996.07 Rs 859.87 December Rs 1010.62 Rs 865.00 For the year 2025 Month (2025) Maximum Target Minimum Target January Rs 1023.13 Rs 869.89 February Rs 1036.10 Rs 878.54 March Rs 1040.00 Rs 871.80 April Rs 1050.91 Rs 886.04 May Rs 1061.08 Rs 883.16 June Rs 1073.60 Rs 890.03 July Rs 1080.11 Rs 897.80 August Rs 1092.29 Rs 904.00 September Rs 1102.12 Rs 909.76 October Rs 1113.00 Rs 914.74 November Rs 1120.29 Rs 919.90 December Rs 1136.30 Rs 926.92 From 2026 2030 Year Maximum Target Minimum Target 2026 Rs 1248.00 Rs 929.92 2027 Rs 1360.00 Rs 966.11 2028 Rs 1467.52 Rs 1009.35 2029 Rs 1585.00 Rs 1044.8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 2030 Rs 1702.38 Rs 1078.20 References: https://www.livemint.com/market/stock-market-news/lic-share-price-journey-so-far-a-muted-debut-a-long-rough-patch-and-a-stellar-rebound-this-stock-has-seen-it-all-11707460881146.html . https://www.moneycontrol.com/news/photos/business/ipo/lic-ipo-a-look-at-the-journey-of-indias-leading-insurance-company-8060971-2.html . https://groww.in/blog/things-to-know-before-investing-in-lic-ipo . Red Herring Prospectus. https://www.chittorgarh.com/ipo/lic-ipo/1221/ . http://google.com . https://www.nseindia.com/get-quotes/equity?symbol=LICI . https://www.indiapropertydekho.com/article/236/lic-share-price-target . - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... 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