The LIC public issue would be the biggest IPO in the history of the Indian stock market. Once listed, LIC’s market valuation would be comparable to top companies like RIL and TCS
Mumbai:
Amid volatility in stock markets generated by tension between Russia and the US over Ukraine, LIC chairman M R Kumar on Monday said that the insurance behemoth was watching the geo-political situation carefully, though it was keen on listing of the IPO in March.
Life Insurance Corporation (LIC) has already filed the DRHP with the Securities and Exchange Board of India (SEBI) for its initial public offering (IPO).
”We are watching the situation closely and carefully…but we are very keen on having listing in March,” Kumar said, when asked about the impact of the evolving geopolitical situation on the upcoming IPO.
This would be the biggest ever IPO, which proposes to raise Rs 63,000 crore by selling 5 per cent government stake through offer for sale (OFS).
There is some shadow of geopolitical tension between Russia and NATO over Ukraine on foreign capital outflow from India.
LIC’s share capital was raised from Rs 100 crore to Rs 6,325 crore during September last year to help facilitate the IPO.
Pprofits of insurance companies cannot be compared with that of manufacturing companies as dynamics of the businesses are different.
”Profit of insurance companies compared to other companies like manufacturing are different. In terms of surplus generation, more than Rs 50,000 crore (has been) generated in the past two years,” he said during an interaction with reporters.
Out of the surplus, 95 per cent was going to policyholders. ”When you look at 5 per cent, it appears to be small in size but then really it is not so,” he noted.
Going forward, Kumar said the surplus distribution pattern is going to change.
The surplus in respect of the participating fund will be allocated between policyholders and shareholders in the ratio of 95:5 for fiscal 2022, 92.5:7.5 for each of fiscal 2023 and fiscal 2024, and then 90:10 from fiscal 2025 onwards.
The company’s focus on non-participating (non-par) products are going to improve profitability further, he said, adding that profit for life insurance companies comes from policies sold.
Last month, LIC reported a profit after tax of Rs 1,437 crore for the first half of the financial year 2021-22 as compared with Rs 6.14 crore in the year-ago period.
Foreign portfolio investors (FPIs) have withdrawn a net Rs 18,856 crore from the Indian markets in February so far amid geopolitical tensions and chances of a rate hike by the US Federal Reserve.
As per depositories data, overseas investors took out Rs 15,342 crore from equities and Rs 3,629 crore from the bonds market between February 1-18. At the same time, they invested Rs 115 crore in hybrid instruments.
This translates into a net outflow of Rs 18,856 crore during the period under review. This is the fifth consecutive month of foreign fund outflows.
The LIC public issue would be the biggest IPO in the history of the Indian stock market. Once listed, LIC’s market valuation would be comparable to top companies like RIL and TCS.
The IPO of LIC is expected by March and the proceeds would be crucial to meet the revised disinvestment target of Rs 78,000 crore in the current fiscal.
Kumar said he is seeing lot of interest from policyholders in the LIC ‘s propose IPO and 6 million to 7 million policyholders have already linked their PAN with their policy numbers.
He opined that s time has come for LIC to realign with market practices on surplus distribution and non-participating policies.
He said agency channel, which has been focusing on participating policies is now adept in changing to sell non-participating policies.
About new products, he said LIC was working on several participating (par) and non-participating (non-par) policies that would be launched going forward.
The government expects to mobilise about Rs 63,000 crore from the proposed Offer for Sale (OFS) to meet the lower disinvestment target of Rs 78,000 crore for the current financial year.
Kumar also said LIC is well capitalised, and potential investors should not worry about government control post the IPO as decisions are taken by its board and not by the government, which will hold a 95% stake after the flotation.
“ There should be no concern on LIC’s investment decisions going forward as extensive due diligence is always done in any investment and corporation has already done a lot of cleaning up of its non-performing assets and doesn’t expect large-scale bad loans going forward,” he said.
The premium is Rs 330 per annum. The scheme is being offered by the Life Insurance Corporation of India and all other life insurers who are willing to offer the product on similar terms with necessary approvals and tie-up with banks for this purpose.