LIC’s dream IPO is here
it’s finally happening. in less than five months, India’s largest IPO will hit the stock markets. the Life Insurance Corporation of India (LIC) is expected to bring out a public issue of ₹75,000 crore, eight times that of Zomato.
the idea for an LIC IPO was planted in the finance ministry as early as 2014. LIC, however, wasn’t amused. the management told late former FM Arun Jaitley that this ‘made no sense’. the plan was immediately dropped.
but things changed a few years later. in 2019-20, India’s fiscal deficit widened to 4.6% of GDP. to meet the revenue shortfall, disinvestment was the best option. and what better than LIC?
a quick announcement was made in Budget 2020. LIC was going to be listed.
with a balance sheet of ₹38 lakh crore (as of June 30), LIC has a major clean-up to do. its assets have to be valued and bad investments need to be cut down. a reduction of its stake in IDBI Bank is on the agenda too.
LIC also has many paintings by MF Hussain across its offices that need to be valued.
meanwhile, a team of 10 investment banks has been chosen to manage the issue. the government wants to wrap this up by March 2022.
with an issue size this huge, India could see a one-of-a-kind split IPO offering for LIC. here, the issue could be split into two tranches with a gap of a few months in between.
LIC has sustained itself with a great track record for over five decades in a tough market. just over 20 years after insurance privatisation, LIC still holds a majority share in India’s life insurance business
yes, it has been criticised in the pack for picking up volatile disinvestments. but since last year it has taken a conscious effort to shine its equity books. the NPAs on its loan book have also shrunk.
the core fundamentals are strong considering that life insurance has only grown in demand since the onset of the pandemic. investors also receive a sovereign guarantee from the Government of India, a rather exclusive benefit. keeping these factors in mind, an LIC IPO is a win-win for all.
if you were a victim of the D-Mart IPO non-allotment, don’t worry. LIC could set aside 10 percent of its issue for policyholders. all signs point to a bumper listing.