Yogakshamam Vahamyham This is the motto of Life Insurance Corporation. Even today, you can find this part of a verse from Gita written under the ‘Logo’ of LIC. This small part of the ninth chapter of the exhortation that Krishna gave to Arjuna should be commended to whoever opted for the Life Insurance Corporation. It means that I will bear the burden of your full skill, that is, I will bear the burden of your whole worry. I will protect what you have and get what you do not have. What is the job of life insurance other than this?
In 1956, the insurance business in the country was nationalized and the entire life insurance business was folded and handed over to LIC. Since then, the meaning of life insurance in India has been LIC. Many people also say in colloquial speech, got LIC done, that means got insurance done. But at this time LIC means something else for the stock market and government and also for the people who want to join or join the stock market. Then whether there are new investors or old players who have been in the stock market for years. Everyone is waiting for the IPO of the country’s largest insurance company LIC, ie Life Insurance Corporation of India.
LIC is one of the largest landowners in the country, apart from being the largest insurance company in the country. It has properties in every big and small city of the country. Money is also so much that it has the power to rise and fall in the stock market. Jefferies had put out a research paper some time ago, according to which the total net worth of LIC after listing could be close to $261 billion. The government has said that it can bring an IPO to sell five to ten percent of it. Even if ten percent is sold, it will be an issue of $ 26 billion, that is, about Rs 1.92 lakh crore. However, it is clear that the government will not be able to sell more than five percent of LIC at a time. Five percent means that the government will bring up to 31.72 crore shares of LIC to be sold in the market. What is the price of these shares, it will be decided that how much money the government will get from it. But it is estimated that this amount can range from fifty thousand crores to one lakh crore rupees.
This will be the biggest IPO in the history of India’s stock market. This IPO or disinvestment of LIC is also very important for the government, because it has set a target of raising Rs.25 lakh crore by selling stake in government companies. This year’s target is Rs 78,000 crore left, and only LIC’s five percent stake can achieve this target.
It is important to note here that LIC is not issuing any new shares. The government is selling its stake in this i.e. some part of its share of shares. This will not affect the health of LIC. The entire amount will go to the government treasury. LIC is not going to get a single penny from this. He doesn’t even need the money. It holds two-thirds of the country’s life insurance business. In 2020, it had $5,640 million in premiums, making it the fifth largest life insurance company in the world by this scale. The premium he received in 2021 is Rs 4032.9 billion. After the IPO, the company’s health will definitely make a difference that till now it was only answerable to the government, whereas after that it will have to give accounts to its shareholders every three months, meaning the management will have to be transparent. With the listing, LIC is expected to be included in Morgan Stanley’s MSCI index, making it an attractive stock for foreign investors.
Legal changes are also needed to attract foreign investors to the company. Five percent stake in the IPO can be set aside for LIC employees. It is reported that for the first time, LIC is preparing to keep a separate quota for its insured as well. LIC has about 29 crores insured and for a long time LIC agents have been explaining to them how to get their policies linked with Aadhaar and how to open a demat account and complete the preparation before the IPO. If half or even a quarter of these people apply for shares, then a big fraternity will be formed. It is expected that whatever price will be fixed in the IPO, some concession will also be given to these two categories of people. The quota for the insured does not mean that they are going to get the shares free of cost.
This is the biggest IPO in the country, so many apprehensions are also arising with it. The biggest question is whether the market environment is right at this time to raise such a huge amount at once. It should not happen that like Paytm, the price of LIC should be such that instead of increasing the enthusiasm in the market, it gets watered down. Therefore, it is largely on this matter at what price the government is ready to sell the shares of LIC. If the price is kept high, then it can prove to be bad news not only for LIC, but also for the market. By the way, there is every possibility that a new wave of bullishness can run in the market with LIC’s IPO. Crores of new demat accounts will be opened and a large number of new investors will come in the market.
(These are the author’s own views)