Last Updated on May 2, 2022 by Vyshakh

2021 was the year it rained IPOs, with 63 companies raising Rs. 1.19 tn, a record for any year. And, this boom is expected to continue well into 2022. 23 companies are lined up to go public only in the first quarter of 2022! However, one IPO has everyone waiting with bated breath – LIC. 

To know more about the LIC IPO, follow our article here: LIC IPO: Date, Price, Review, News, Application and Details!

The IPO of India’s most prominent insurance company is touted to be the largest ever IPO to hit the Indian markets. 

But before we get into how you can go about applying for the IPO, let’s take a step back and look at the bigger picture.

This article covers:

Why is LIC going public?

The Life Insurance Corporation of India (LIC) is a 100 % government-owned life insurance company. In the 2021 Union Budget, Finance Minister Nirmala Sitharaman announced the government’s proposal to disinvest a 5-10% stake in LIC to mop up revenue for the Government. This IPO is expected to contribute nearly Rs. 1 lakh cr. towards decreasing the budget deficit. 

However, to clarify, LIC is not being privatized completely. Even after the IPO, the government will continue to have a majority stake in LIC to protect the interests of its 290 mn. policyholders. 

Why is there a buzz around this IPO? 

LIC is one of the oldest companies in India and has been growing strength to strength even as new-age insurances compete to take away market share. The sheer size of the subscriber base, size of the company, and its valuation for the IPO are talking points. 

It can, however, be difficult to gauge precisely how large this IPO is as a retail investor. LIC, the largest asset manager in India plans to raise Rs.50,000 cr. going public, the largest to date. For context, Paytm IPO raised Rs.18,300 cr., Coal India and Reliance Power raised Rs.15,200 cr. and Rs. 11,700 cr., respectively. LIC’s IPO is expected to be larger than all 3 (Paytm, Reliance Power, and Coal India) combined. 

The value of LIC’s assets is larger than the entire GDP of many countries including the UAE! Well, this mammoth amount is driven by the valuation of LIC’s $511 bn. assets which include its millions of policies, fixed assets, and the sovereign guarantee of its policies. 

It is no wonder then that retail and institutional investors alike are eager to participate in this wealth creation opportunity.

How can you apply to the LIC IPO as a policyholder?

Every IPO has primarily two categories under which you can apply – retail investors and HNIs. However, the LIC IPO has a special category for policyholders as well. As proposed by the government, 10% of the issue will be reserved for policyholders.

Typically in an IPO that expects a strong listing, the retail investor category gets oversubscribed multiple times, and hence getting allotment is a matter of lottery as dictated by SEBI guidelines on IPO oversubscription. Thus the policyholder category can be a good alternative to increase your chance of getting an allotment. However, do note if you are a policyholder and wish to apply as a retail investor as well, you will have to choose one single category via which you apply to the IPO.

Now that is clear, let’s dive into the specifics of applying for the LIC IPO as a policyholder!

Steps you need to follow

  1. Ensure that you have an active Demat account: Just as any other investment activity, an active Demat account with a registered broker is mandatory for participation in the LIC IPO. The maximum amount you can invest as a policyholder is Rs. 2 lakh, so also ensure that your bank account has the requisite amount you plan to invest.
  1. Ensure that your PAN records are updated on the LIC website: LIC has been chasing policyholders to update their PAN records as part of the KYC compliance process. Using the IPO as an impetus, they have made it mandatory for policyholders’ PAN card details to be linked to the policy before the IPO application.

So go ahead and check your PAN status on https://linkpan.licindia.in/UIDSeedingWebApp/getPolicyPANStatus

In case your PAN is not registered with your policy, you may update it at the LIC India’s portal (https://licindia.in/Home/Online-PAN-Registration) by providing your Policy number, date of birth, mobile number and email ID. You may also contact your LIC agent for any queries you may have. However, the digital process is seamless and should not take you more than a few minutes. 

  1. Apply for the IPO: To apply for the LIC IPO, visit your usual investing portal. Simply visit the IPO application section, choose LIC and remember to select the category as ‘Policyholder’. Submit your bid details as suitable and voila!

Conclusion

The company is most likely to file its draft prospectus this month, with the issue hitting the markets no sooner than Q4 of the current fiscal year. However, despite the hype, remember that equity markets are extremely risky and even the best of companies have had a tepid investor reaction and struggle to hold on indices as of today. 

But, all said, keep an eye on the headlines and you can soon expect to participate in a landmark event in India’s financial markets! 

Aradhana Gotur

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