The government of India recently announced the launch of LIC IPO in its 2020 budget. The DRHP of LIC IPO was filed on 13th Feb. The government offers 31.62 crore shares or 5% of its equity in the IPO. This IPO aims to ensure more discipline and transparency in the company’s operations and give retail investors a chance to invest in the company. An IPO does not signify LICs privatization as privatization and listing are two different things. The government plans to sell a part of its stake through this IPO.
LIC was founded in 1888 and now has over 29 crore policyholders. It has a separate quote for them. Policyholders can apply for LIC IPO if their policy is linked to their PAN card, and the company may provide their shares at a discounted rate.
What to Consider Before Applying for the LIC IPO
LIC has always been a government-controlled entity. An IPO occurs when a company decides to go public.
Here are a few things that you should know before applying in LIC IPO shares:
- An amendment has been made in the LIC Act, 1956, to facilitate the rollout of IPO. The amendment means that the LIC will become a listed company and prepare quarterly earnings statements and reports. Moreover, any development within the company will have to be made publicly available post the IPO.
- LIC also asked its policyholders to update their PAN and make sure that they have a valid Demat Account to apply for LIC IPO.
- The total valuation of the IPO is estimated at around Rs 70,000 to Rs 1 Lakh Crore. The LIC IPO price band will be decided in due course.
- LIC has a 66% market share in the New Business Premiums with 283 mn policies and 1.35 mn agents as of 31st March 21.
Benefits of the LIC IPO
- The LIC IPO will provide long-term investors with an attractive investment opportunity.
- The LIC IPO provides a fantastic opportunity for individual investors and workers to participate in the firm for the long term and profit on the first day of trading.
- The LIC policyholders may have a 10% reservation in the LIC IPO, an added advantage.
- From a valuation perspective, the LIC IPO is unlike any other IPOs. As a result, the IPO valuation is robust compared to its competitors regarding the estimated price.
- LIC IPO will boost the investor’s confidence, and it will add to the increase in the opening of Demat accounts.
How to Apply for LIC IPO as a Policyholder?
If you are a policyholder, you need two things to apply for the LIC IPO.
A PAN card linked to Your LIC Policy Account-
To apply for LIC IPO, the policyholders should ensure that their PAN details are updated in the corporation’s records since your PAN card details are a must if you apply for LIC IPO. In addition, your PAN card information is required when you trade on the stock exchange. Here, you should also ensure that your PAN number is linked with your LIC policy.
A Demat Account
Whether you are a policyholder or a typical investor, you need a Demat account to buy stocks. You can open a Demat account with any stockbroker. You also need to make sure that your KYC details are updated. The process for opening a Demat account on the IIFL Securities website is straightforward and requires minimum documentation.
LIC IPO Launch Date
The draft of the IPO has been released, but nobody knows about the LIC IPO date. The government has not given its final approval for the LIC IPO date of 2022. But it is expected to be launched in the first half of the financial year 2022. Also, many government officials have been saying that the LIC IPO 2022 will happen by the end of March this year.
LIC IPO: Why you Should Subscribe?
IIFL Securities has listed many reasons for investors to apply for LIC IPO, including its history and highest market share in the country, which stands at 66.28% as of FY 2020-21. Moreover, LIC being a significant issue, the chances of allotment is higher.
The life insurance industry is growing at 22.5% annually, yielding a higher return on investment. The LIC IPO also has enough room for a sharp increase in the number of Demat accounts in India. Suppose 100 percent of these Demat policyholders are LIC policyholders. Then LIC will have about 24 crore policyholders without any Demat account. And hence, the opportunity for new customers is very high.
The Bottom Line
Ever since a lot of buzz around LIC IPO got created, the IPO details have not got disclosed yet. The government made an intelligent move mentioning that the existing policyholders would be given preferential treatment. It’s LIC; after all, everyone would benefit from it.