LIC IPO May Defer to FY23 Amid Russia-Ukraine War

Synopsis – Reportedly, the LIC IPO was expected to enter the market this month. Once listed the LIC IPO would be the country’s biggest IPO and its valuation will be at par with top players in the market such as RIL and TCS. It has filed the draft document for a sale of a 5 percent stake by the government of India.

Amidst the ongoing war between Russia and Ukraine, the Government of India has decided to defer the Initial Public Offerings (IPO) of Life Insurance Corporation (LIC), India’s biggest life insurer, to the next financial year FY23. The decision comes in wake of the worsening geopolitical equations and their impact on the markets.

Reportedly, the LIC IPO was expected to enter the market this month. Once listed the LIC IPO would be the country’s biggest IPO and its valuation will be at par with top players in the market such as RIL and TCS. It has filed the draft document for a sale of a 5 percent stake by the government of India.

India’s Finance Minister Nirmala Sitharaman in an interview with the Hindu Business Line had also anticipated the review of LIC IPO in the wake of emerging geopolitical situations. She has said that she would be willing to go ahead with the IPO because it was planned entirely based on Indian considerations. However, she added that if the global scenario indicates relooking at the plan, she wouldn’t mind doing the same.

In its filing to the Securities and Exchange Board of India (SEBI) on February 13, LIC mentioned its objectives stating, “The objects of the Offer are to (i) achieve the benefits of listing the Equity Shares on the Stock Exchanges; and (ii) carry out the Offer for Sale of up to 316,249,885 Equity Shares by the Selling Shareholder.”

“The Selling Shareholder (President of India acting through the Ministry of Finance, Government of India) will be entitled to the entire proceeds of the Offer after deducting the Offer expenses and relevant taxes thereon. Our Corporation will not receive any proceeds from the Offer,” the filing added.

The IPO is wholly an offer for sale (OFS) of 316,249,885 shares by the shareholder, who is the President of India, acting through the Ministry of Finance. Currently, the Government of India owns the whole shares of the country’s biggest public-life insurer. LIC’s total equity sits around 632 crore shares.

Giving an overview of in the briefing to SEBI, LIC had mentioned its strengths as brand name, sole leadership as a public player in the market, product portfolio, and no loan default. It also named SBI Life Insurance, HDFC Standard Life Insurance, and ICICI Prudential Life Insurance as its competitors.

The public insurance company further mentioned its agent network in the filing, “In India, LIC has the largest agent network of 1.35 million individual agents as at March 31, 2021, which accounted for 55 percent of the total agent network in the country and was 7.2 times the number of agents of the second-largest insurer.”

What is Life Insurance Corporation or LIC?

Established September 1, 1956, through the Life Insurance of India Act 1956, LIC or Life Insurance Corporation is India’s statutory insurance and investment corporation. Earlier LIC had a monopoly of soliciting and selling the life insurance sector in India until liberalization was introduced for the sector, allowing private players to enter the market.