LIC IPO GMP, Issue Date, Financials Details, Price, Lot Size

LIC IPO
LIC IPO (Image: Canva)

LIC IPO India’s biggest IPO (Initial public offering) so far is coming at around 21000 crores. LIC was the only insurance company in India from the year 1956 to the year 2000.

LIC’s DRHP (Draft Red Herring Prospectus) was filed with SEBI (Securities and Exchange Board of India) in February 2022 but the final IPO details were announced on 26 April 2022.

Before the IPO of LIC, the Government of India used to hold 100% shareholding, but after diluting 3.5% in the IPO, the government’s stake will be 96.50%.

LIC IPO Details

IPO Open Date4 May 2022
IPO Close Date9 May 2022
IPO Listing Date17 May 2022
Market cap6 lakh crore
Minimum lot size and shares1 lot and 15 shares
1 lot₹14235
Maximum lot size and shares14 lot and 210 shares
Policyholders Reservation10%
IPO allotment Date12 May 2022
IPO Issue TypeBook Built issue IPO
Employee and Retail Discount₹45 per equity share
Policyholders Discount₹60 per equity share
Share allotment date16 May 2022
Fresh IssueNil
Face value₹10 per equity share
Issue Size₹21008.48 crores
Listing ExchangeBSE (Bombay Stock Exchange), NSE (National Stock Exchange)
IPO Price Band₹902 to ₹949 per equity share
Offer for saleUp to ₹21008.48 crores

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About LIC Company

LIC was established on 1st September 1956 and 245 private life insurance companies were combined to form a big national company named LIC (Life Insurance Corporation of India). LIC has 4983 offices spread across all-state in India and union territories and a multi-channel distribution platform.

LIC is India’s largest life insurance company and has a 64% market share in terms of premiums annually. LIC is the largest life insurance company in India by market share.

LIC has 43% market share in individual new business premium (NBP) and 74% market share in group new business premium. In the financial year 2001, the insurance industry was privatized, after which many insurance companies came into the market.

As of March 2021, 20 out of 23 private insurance companies registered with IRDAI (Insurance Regulatory and Development Authority) had joint ventures with international insurance giants.

LIC has India’s largest distribution network and almost 1.35 million agents who make up 55% of India’s total agent workforce. LIC sells 71% of the policies currently sold in rural areas.

LIC has a global operation in India, the Middle East, Singapore, UAE (Dubai and Abu Dhabi), Bahrain, Oman, Kuwait and many countries, etc. And their largest asset under management in India is 39.5 lakh crores.

The total cost ratio of LIC in FY21 was 14.2% while the average of the rest of the private players was 15.1% and the average ratio of the industry was 16.9%. LIC’s gross written premium of almost 60.9% in FY21 came from the participating product.

Despite losing market share in the last decade, LIC is still on top in India with 71.8% share of all individual policies sold in India and 88.8% market share in group policies from April 2021 to December 2021.

There is a lot of under-penetrations in the insurance sector in India, the protection gap of India in the financial year 20 was more than 83%, which is the highest among all the major economies of the Asia-Pacific region.

According to reports, the Indian insurance sector may grow rapidly in the coming years as the new business premium (NBP) is expected to grow at a CAGR of 13% to 16% between FY21 to FY32.

LIC offers a variety of offers. Individual participating insurance products where the holder gets a share of profits as a bonus or dividend.

In FY21, only 0.2% of their gross written premium came from market-linked products, as against the private player’s average of 39.3%, indicating that LIC is less vulnerable to market volatility compared to other private players.

The LIC company has a total of 6,32,49,97,701 shares, which were owned by the Government of India before the IPO, but through the IPO, the government will sell a 3.5% stake through 22,13,74,920 shares.

Out of the total shares, 0.02% (15,81,249 shares) have been kept as Employee Reservation Portion, 0.35% (2,21,37,492 shares) has been kept as policyholder reservation portion and 3.13% (19,76,56,179 shares) has been kept for others.

LIC can grow a little slower compared to other industry players. This is also evident from the market share in individual and group new business premium which has declined from 56% in FY16 to 43% by April 2021 to December 2021.

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LIC Company’s Financials

April 2021 to Dec 2021 (FY22)FY21FY20
Revenue₹512,398.79 crores₹703,732.43 crores₹645,640.92 crores
Total Assets₹4,090,786.78 crores₹3,746,404.47 crores₹3,414,174.57 crores
Profit after tax₹1715.31 crores₹2974.14 crores₹2710.5 crores
Total Debt₹3.66 crores₹3.67 crores₹253,413.60 crores
Source: LIC Annual Report

The net worth of LIC was Rs 815.33 crore in FY19 and then increased to Rs 854.65 crore in FY20 but suddenly it increased to Rs 6514.64 crore in FY21 and Rs 8230.50 crore by December 30, 2021.

The conservation ratio of LIC was 84.48% and the first year premium was Rs 343409.95 million in the FY21 due to the Covid 19 pandemic. From April 2021 to December 2021, the conservation ratio increased to 93.72% and the first year premium increased to Rs 222153.27 million.

LIC’s revenue was Rs 570855.09 crore in FY 19, then increased by 13.10% to Rs 645640.92 crore in FY 20. It grew by 9% to Rs 703732.43 crore in FY21 and declined by 2.92% to Rs 512398.79 crore as of 30 December 2021.

LIC’s embedded value was Rs 95605 crore in financial year 21, which has increased sharply to Rs 539686 crore by December 2021.

LIC’s profit in FY 19 was Rs 2627.38 crore, increased by 3.16% to Rs 2710.48 crore in FY 20. Profit increased by 9.73% to Rs.2974.14 crore in FY21 and profit declined by 23.10% to Rs.1715.31 crore as of December 30, 2021.

The total assets of LIC in FY 20 were Rs 3414174.57 crore which increased to Rs 3746404.47 crore by FY 21. From April 2021 to December 2021, the total assets reached Rs 4090786.78 crore.

LIC’s debt was Rs 269400.60 crore in FY 19, reduced to Rs 253413.60 crore in FY 20, further reduced to Rs 3.67 crore in FY 21, and stood at Rs 3.66 crore as of 30 December 2021.

LIC’s profit after tax was Rs 2710.5 crore in FY 20, which increased to Rs 2974.1 crore by FY 21. From April 2021 to December 2021, the profit after tax reached Rs 1715.3 crore.

Before the FY21, whatever amount LIC used to collect in the form of premium, savings, or investment, all that money was invested in government securities, equity (dividend form), interest, etc.

And out of all the returns received from it, the company takes out its expenses, then the surplus money was also distributed to the LIC policyholder.

95% of the money was distributed to the policyholder itself, the remaining 5% was left for the shareholder (Government of India).

The company has gradually lost its market share in selling group and individual policies. But despite the drop in LIC’s market share in the last two decades, LIC remains one of the top company in the life insurance sector due to its distribution network and other competitive advantages.

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From the FY21 onwards, LIC did not distribute the surplus amount but used it to increase the equity share capital and in some of the reserves, bonus shares were issued to the Government of India.Due to this the equity share capital of LIC increased by Rs 6325 crores while before the financial year 21 it was not more than 100 crores.

The commission ratio of LIC is 5.5% to the rest of the competitors in the financial year 21, the same operating expenses ratio is 8.7% from the rest of the competitors in the same period.

From FY 16 to FY 20, new business premium grew by 17% on a year-on-year basis and total premium grew by 12% year-on-year.

According to reports, the market share of LIC in India was 71.8% in 2016 which has now decreased to 64.1% in 2020 while the market share of private companies is increasing.

The total premium of LIC from April 2021 to December 2021 was Rs 2840.5 billion, of which 66.6% comes from individual premiums and 33.4% comes from group premiums.

According to the reports, LIC’s premium CAGR has grown by 7.1% from FY11 to FY21 and the new business profit margin has grown by 7.8%, and the renewal premium by 6.5%.

Indian embedded value of LIC is Rs 539686 crore and P/B ratio is 92.14 and the P/E ratio is 201.91 till September 2021 end.

According to RHP, LIC’s persistency ratio in FY21 after 13 months is 79%, after 25 months the ratio is 70%, after 37 months the ratio is 67%, after 49 months the ratio is 63% and after 61 months the ratio is 59%

According to RHP, LIC’s new business profit (NBP) in FY21 is 93.8% from individual agents, 3.1% from corporate agents (banks), 0.1% from corporate agents (others), and 0.8% from other channels.

According to LIC’s RHP, from April 2021 to December 2021, LIC’s IEV (Indian embedded value) is Rs 539686 crore and the total market cap of LIC is made up to about 6 lakh crores on the upper band.

LIC had a 51% stake in IDBI earlier, all that debt LIC had to show in consolidated financials. But now LIC has reduced the stake from 51% to 49%, due to which it is a separate associate company, due to which that consolidated debt no longer appears in the books of LIC, due to which the debt of LIC suddenly decreased in the financial year 21.

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LIC changed the surplus distribution from September 2021 by separating participating policy and non-participating policy. The participating ratio is 70% and the non-participating ratio is 30%.

Out of 100% of the participating surplus, 90% of the surplus is distributed to the policyholders in the form of a bonus and the remaining 10% remains to the shareholders.

100% of the non-participating surplus is distributed among the shareholders.

According to RHP, LIC gets 2.4% from the individual agent and 97.5% from direct business in FY21 from the new business profit (NBP) group. The solvency ratio of LIC was 1.77 from April 2021 to December 2021, 1.76 in FY 21, 1.55 in FY 20, and 1.60 in FY 19.

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This article is only for education purpose and the author has his own views and research, so if you invest in these stocks/forex/Virtual Digital Asset then do it at your own risk and do the research yourself before investing.

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FAQs about LIC IPO

When was LIC company established?

LIC was established on 1st September 1956 and 245 private life insurance companies were combined to form a big national company named LIC (Life Insurance Corporation of India).

How many offices does LIC have in India?

LIC has 4983 offices spread across all-state in India and union territories and a multi-channel distribution platform.

How much stake does the Government of India have in LIC after the IPO?

Before the IPO of LIC, the Government of India used to hold 100% shareholding, but after diluting 3.5% in the IPO, the government’s stake will be 96.50%.

How much stake and shares will the Government of India sell through LIC IPO?

The LIC company has a total of 6,32,49,97,701 shares, which were owned by the Government of India before the IPO, but through the IPO, the government will sell a 3.5% stake through 22,13,74,920 shares.