LIC IPO

Introduction

The Life Insurance Corporation of India or LIC India is an insurance group owned by the Government of India. Founded on September 1, 1956, LIC was made from a merger of over 245 insurance companies and provident societies.

As of 2019 LIC has revenue of ₹3.37 lakh crores, net income of ₹29.9 thousand crores, and total assets of ₹31.12 lakh crores.

In the year 1818, Oriental Life Insurance Company became the first life insurance company in India. The Company was started by Europeans in Calcutta with the motive to look after the needs of Europeans in India. At that time, the lives of the native Indians were not insured.

This led to the formation of Indian Insurance companies like the Hindustan Insurance Society (which later became Life Insurance Corporation) founded by Surendranath Tagore. The Bombay Mutual Life Assurance Society, became the first insurance provider for the natives of India, in the year 1870.

The Parliament of India passed the Life Insurance of India Act on June 19, 1956, and created the Life Insurance Corporation of India.

Subsidiaries of LIC:

• IDBI Bank (Listed Subsidiary)
• LIC Housing Finance (Listed Subsidiary)
• Lic Pension Fund Ltd
• Lic International
• Lic Cards Services
• Lic Mutual Fund

As of March 2019, LIC has a workforce of 111979 employees.

Importance of LIC

Market share of LIC: In the year 1991, economic reforms were introduced in India. These economic reforms introduced liberalization and globalization in India. It was the year 2000, with the entry of insurers such as New York Life Insurance Co. and Prudential Plc, LIC had to give up its monopoly of 44 years.

As of (2018-2019) LIC holds a giant 66.24% insurance market share by premium. It is the leading insurer of India.

Impact of LIC on the stock market: When the news of LIC IPO was announced by the Government of India, stock prices of Insurance peers: SBI Life Insurance, General Insurance Corp. of India, HDFC Life Insurance Co. and ICICI Prudential Life Insurance Co.; slumped around 6% to 14%.

It is an undeniable that LIC is a huge company. The fact that it holds a stake in so many companies is enough to prove its magnitude.

Companies LIC holds a stake in:

Company	Holding in %
ADANIPORTS	2.55
ASIANPAINT	2.92
AXISBANK	10.37
BAJAJ-AUTO	4.6
BAJAJFINSV	2.16
BPCL	5.55
CIPLA	3.49
DRREDDY	3.91
GAIL	4.99
GRASIM	10.78
HDFCBANK	2.52
HEROMOTOCO	5.54
HINDPETRO	3.74
HDFC	3.73
ITC	16.32
ICICIBANK	10.37
IBULHSGFIN	10.78
IOC	6.51
INFY	5.85
KOTAKBANK	1.95
LT	16.92
LUPIN	2.42
MARUTI	6.8
NTPC	10.83
ONGC	9.48
POWERGRID	4.89
RELIANCE	6.78
SBIN	9.25
SUNPHARMA	5.88
TCS	3.98
TATASTEEL	9
UPL	4.17
VEDL	6.39
WIPRO	4.81

With stakes in companies like Adani Ports, Asian Paints, Axis Bank, HDFC Bank, Infosys L&T, Maruti, Reliance, Tata Consultancy Services, etc. LICs assets total up to ₹31.12 lakh crores.

Help to the Government: LIC has always acted as a helping hand to the government. It has invested in PSUs that no one was buying. Since 2007 (till 2016), the Indian Government has raised an amount of ₹1.39 lakh crores through disinvestment, out of which the total stake bought by LIC was ₹55 thousand crores. Out of 43 issues between 2007-2016, LIC invested in 29 issues.

Year	State-owned company LIC invested in
2010	REC, NMDC, and NTPC
2014	Coal India
2016	Indian Oil
2017	GIC
2018	Hindustan Aeronautics

In the year 2010, LIC shelled out ₹11,500 crore to buy shares of three PSUs REC, NMDC and NTPC. LIC invested an amount of ₹10.7 lakh crore between FY14-15 and FY 18-19 in PSUs that included many ailing banks. Currently LIC owns stake in 21 state-owned banks, out of which 11 are under RBI monitored clean up.

LIC’s Contribution to the five year plans over the years
Plan	Year	Investment
2	1956-1961	₹184 Cr
3	1961-1966	₹285 Cr
4	1969-1974	₹1,530 Cr
5	1974-1979	₹2,942 Cr
6	1980-1985	₹7,140 Cr
7	1985-1990	₹12,969 Cr
8	1992-1997	₹56,097 Cr
9	1997-2002	₹1,70,929 Cr
10	2002-2007	₹3,94,779 Cr
11	2007-2012	₹7,04,720 Cr
12	2012-2017	₹14,23,055 Cr
13	2017-2022	₹28,01,483 Cr

LIC has often acted as an investor of last resort. It has supported many state-owned companies by buying securities.

LIC IPO Details

Expected Size: According to a government official it is unlikely that the LIC IPO will be more than 10%. To get an accurate number for the issue size, a valuation report is to be prepared.

Expected Date: According to the government, LIC IPO is likely to happen in the second half of FY21. The issue with this date is the size of LIC. When SBI Life put out an IPO, it took them 9 to 12 months to prepare the valuation report and get approvals. With LIC, these processes are going to take much more time, making the FY21 target, a race against time.

Difficulties: Before the LIC IPO happens, a lot of changes and amendments need to take place. There is a list of problems that need to be dealt with:

1. LIC Act 1956: Before the IPO becomes a reality, amendments must be made to the LIC act of 1956. This is the very act that nationalized LIC. The act must be amended so that LIC is turned into a company. This is one of the major problems in the case of LIC.
   
2. IRDAI: The Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous, statutory body which regulates and promotes the insurance industry in India. While LIC may have its own rules and regulations, it is a part of the insurance industry and hence will need approvals from IRDAI before its IPO.
   
3. Protests: Following finance minister Nirmala Sitharaman’s announcement in her Budget 2020 speech, nearly 1 lakh employees of LIC staged an hour-long walk-out against the government’s decision to disinvest a part of its stake through an IPO.
   
4. SEBI: After all of the above problems are dealt with, LIC will further need a nod of approval from SEBI.

Peer Comparison

1. Other Life insurance IPOs:
   1. HDFC Life IPO – ₹8,695.01 Cr
   2. SBI Life Insurance IPO – ₹8,400.00 Cr
   3. ICICI Prudential Life IPO – ₹6,056.79 Cr
   4. General Insurance Corporation of India IPO – ₹11,175.84 Cr
2. Largest IPOs of all time (India)
   1. Coal India Ltd – ₹15,000 crore
   2. Reliance Power – ₹11,560 crore
   3. General Insurance Corporation of India IPO – ₹11,175.84 Cr
   4. ONGC – ₹9,500 crore
   5. DLF- ₹9,187.50 crore
3. Largest IPOs of all time (Globally)
   1. Saudi Aramco – $29.4B
   2. The Alibaba Group – $25B
   3. SoftBank Group – $23.5B
   4. Agricultural Bank of China – $22.1B
   5. Industrial and Commercial Bank of China – $21.9B
   6. American International Assurance – $20.5B
   7. Visa Inc. – $19.7B
   8. General Motors – $18.15B
   9. NTT DoCoMo – $18.05B
   10. Enel – $16.59B
   11. Facebook – $16.01B