LIC’s Mega IPO At Rs 8 Lakh Cr Valuation Will Launch On This Date (LIC Chairman’s Statement)

LIC Chairman M R Kumar spoke in length about the insurer’s upcoming IPO, the struggles in its preparations among other details of the massive exercise.

He said that the listing could take place by March 2022 which will be India’s biggest-ever IPO.

Preparations

For an insurance company, calculation of embedded value (EV) is critical and requires specialised software.

This software was not available in India, and so it had to be bought from Singapore.

Challenges were also posed by the company’s huge customer base and large number of policies.

Management

A project management team of 100 people has been set up which is backed by bankers and DIPAM.

This team works on evaluating the asset share of 250 products.

This requires a large server capacity which was 300 terabytes for all 113 divisions prior to March 2020.

This had to be expanded to 1,000 terabytes for operations and 1,000 terabytes for recovery.

The Chairman expressed optimism of completing the daunting task “this fiscal”.

Relevance To The Policy Holder

He said that a portion of the IPO will be set aside for policy holders.

The reservation of shares for customers will be for the first time.

He said that the IPO has the “potential to expand the entire capital market” given the 60 million demat accounts in the country and the company’s 250 million customer base.

Any Changes Under Increased Scrutiny?

The Chairman was asked whether LIC will see any changes in terms of its approach to customers and policy holders.

He responded that with regards to customer engagement, “nothing changes” but there will be differences in regulations.

SEBI regulations and listing requirements will be applicable, something the company will have to be “mindful of”.

It will also have to be “conscious of the fact that disclosures will be more important”, specifically “regular disclosures, the frequency, quarterly results, analysts calls” and the response to the queries.

Threat Of Losing Market Share

In response to a question about fears of losing market share which happens when the market is opened up, the Chairman said that it will not lose its competitiveness.

When the company experienced loss in market share over the years, it had less to do with LIC’s own shortcomings and more to do with the growth of other players.

The company is actively taking growth initiatives such as “stepping up digital marketing and bancassurance, trying new products and slowly getting into non-par products”.

He hopes to regain market share to levels “seen in the beginning of the year” by Q4.