Most of the investors of the country investing money in the market are eagerly waiting for LIC’s IPO.
The government has announced that when LIC IPO opens, 10% shares will be reserved for policyholders. Especially for such investors who have an insurance policy in LIC. There is a big reason behind this.
The law has been amended to keep LIC policyholders at par with employees, so that they can also get 10% of the float at a discount of 10%.
LIC IPO Comes on December- March
The date of LIC’s IPO is not yet decided, but it is expected that the issue will hit the market by December-March 2022 and will be listed in the third or fourth quarter of the financial year.
However, the target for this has been kept till the end of the financial year i.e. March 2022. It will be launched between December-March. The cabinet has recently approved LIC disinvestment.
The issue price could be Rs 1 lakh crore. Major changes have been made in the LIC Act 1956 for IPO and listing. How many shares will be sold and in which price band they will be, it is not decided yet.
What will the policyholders get from the IPO?
While announcing the LIC IPO, the government had said that 10% of the shares from the issue size would be reserved for policyholders, just as shares are reserved for employees in the company’s IPO.
However, it will be on a competitive basis. Meaning the policyholder will get cheaper shares than the common investors. At present, there are about 28.9 crore policyholders in LIC.
The law of the market says that the company can issue shares to the employees by giving a maximum discount of 10% of the floor price.
Why is LIC IPO important for the government?
The disinvestment of LIC is very important for the government. If it has to meet the disinvestment target of Rs 1.75 lakh crore in this financial year, then it can be done from LIC only.
Finance Minister Nirmala Sitharaman had announced in the budget that in 2021-22, the government wants to raise Rs 1.75 lakh crore through disinvestment. There is also a plan to privatize two public sector banks, but nothing has been decided yet.
What can be the price band
At what price the shares will be brought in LIC IPO, it is not decided yet. But, it is very important from the market point of view.
Actually, the experience of IPO of government insurance companies before getting listed in the market has not been good. In the year 2017, the share of New India Assurance Company was offered for Rs 770-800. It was listed on BSE for Rs 748.90. Today the share price of New India Insurance is around Rs 161 much below the listing price.
General Insurance Corporation of India was listed on NSE at Rs 857.50, but today its price has reached Rs 149.50.
Why should you invest money?
LIC is the largest company in the insurance sector of the country. Considering the size of LIC and its reach to the common man, the growth in its business is only anticipated.
In view of the pandemic-like situations, there are strong prospects for the future. The market share of LIC is around 66 percent. As on 31 March 2020, the total assets of LIC were Rs 37.75 lakh crore.
It has a vast network of 22.78 lakh agents and 2.9 lakh employees. LIC is also one of the largest institutional investors in the stock market. Investing in the stock market is a big deal.