LIC is all set for going public!
When someone says a company is going public, they are referring to the fact that the company is selling shares to the public. This is different than when the company was privately owned. Prior to going public, a company is private. Investors buy shares of a company in the hopes of making a profit. The process of a private company going public is called Public Offering or IPO. An IPO is the most common way for a company to raise capital. It is the most public form of raising capital and the most accessible for retail investors. It allows a company to sell shares to the general public, which can be traded like stocks and give the investor the ability to have a piece of the company. It also allows the company to get cash to grow the business.
Why is LIC going public?
Life Insurance Corporation of India (LIC) is the country’s largest non-banking financial company. It is a mutual life insurance company that provides life insurance, general insurance, pension and other investment products. Today, there is a discussion that the company has decided to go public and offer LIC IPO – Akruti to investors. The question that arises here is Why? Why is one of the largest Indian companies going public? Well, as we all know that IPOs are a way for companies to raise capital by selling shares to the public. Instead of raising money by issuing debt or receiving grants from investors, companies use their shares as collateral to raise money from the public. This means that the company is no longer beholden to its investors, but is free to pursue its own strategies — like making big acquisitions or paying dividends — without worrying about investors’ interests. Public offerings are used by well-established companies to grow their shareholder base, expand their reach, and build financial strength. So, LIC is using the same strategy to raise its capital by offering LIC IPO.
When will LIC issue an IPO?
The LIC IPO will open on March 11, 2022 for few investors (anchor investors) and on March 14, 2022 for other investors if everything happens according to the company’s planning and get approvals on time. According to reports, the share sale may be worth approx. Rs 65,400 crore. Each piece would cost in between Rs 2,000-2,100. The LIC IPO is the one of the biggest IPO India is planning. The government is planning to sell 5% of the Life Insurance Corporation’s stake and aims to elevate about 654 billion rupees.
What are the LIC IPO Issue Highlights That You Need to Know?
Today, LIC is the most awaited IPO. The IPO will hit the market in March 2022. The analysts estimation says that the IPO may introduce 1 crore new demat accounts which is a big woww for Indian market dynamics. The same would increase investors participation and will lead towards the growth of the economy and help the Indian government to make revenue through Securities Transaction Tax.
The key highlights that you need to know are:
- For a background, LIC is in the business for more than 65 years now and is the top life insurer in India. It has 64.1% share with respect to GWP, 66.2% shares with respect to New Business Premium and 74.6% shares as to the number of individual policies issued.
- The firm filed the red herring prospectus with SEBI (Securities Exchange Board of India) on February 13,2022. The draft was filed to uplift Life Insurance Corporation’s funds by way of an IPO.
- Presently, The Indian government owns 100% stakes of the firm.
- The issue size of the IPO will consist of a 5% stake by the Indian government which will offer an approx of 316.25 million shares.
- Axis Capital, Goldman Sachs India Securities, CItigroup Global markets India, Kotak Mahindra Capital, JP Morgan India, Nomura Financial Advisory, ICICI Securities, and SBI Capital etc. will be the managers to the IPO issue.
- The global ranking of LIC according to Gross Written Premium is fifth in terms of life insurance and tenth in total assets.
- The reports say that the Indian government is planning to keep a particular section of the LIC IPO for those who own LIC’s policy. The policy holders may get discounts as the plan is to target a broad section of retail investors.
- The government is also planning to take approvals for 20% foreign investment to get foreign investors into the frame and celebrate the IPO as a huge success.
If we analyse LIC’s IPO in the long run, it has a potential to give a positive structure to the sector and to its own firm. To count its advantages, it will raise transparency in LIC’s operations and can also increase consciousness when it comes to business decisions. The IPO has set the competition on a high level. There’s a high possibility of the Indian market witnessing growth after implementing the LIC IPO.