'LIC is well-capitalised,' says chairman M R Kumar ahead of mega IPO

He reassured prospective investors not to worry about the Centre's control post the listing as the company's decisions are taken by its Board and not by the Centre

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State-run Life Insurance Corporation Of India (LIC), which is planning the country's largest IPO next month, is well capitalised, the company's chairman M.R Kumar said on Monday.

Kumar said LIC's potential investors should not worry about government control post the IPO as decisions in the country's largest insurance company are taken by its board and not by the government, which will hold 95% of stake post the IPO.

LIC is planning to sell a 5% stake to raise about $8 billion next month, which could make it India's largest IPO by far.

"As of now, I do not believe that we require capital. Going forward if there is any growth capital requirement, we will approach not only the government but all the shareholders," said Kumar at a press conference.

"The profitability of any insurance company is different from others. Our surplus was more than Rs 50,000 crore, but 95% of it was going to policyholders. Going forward, the surplus distribution changes from 95% to 90%, so profitability will also increase gradually," he added. 

About new products, he said LIC was working on several participating (par) and non-participating (non-par) policies that would be launched going forward.

On being asked whether evolving geo-political tensions between Russia and Ukraine and the subsequent sell-off by foreign investors in the equity segment will have an impact on the insurer's IPO, he said: "We are watching the situation very closely and carefully."

LIC filed the Draft Red Herring Prospectus (DRHP) for the Initial Public Offering (IPO) this month. The government expects to mobilise about Rs 63,000 crore from the proposed Offer for Sale (OFS) to meet the lower disinvestment target of Rs 78,000 crore for the current financial year.

The Centre aims to offload a total of 316 million equity shares to investors through the public offering of the 6.32 billion outstanding shares, the document showed.

LIC may not sell its entire stake in IDBI Bank and can use its large network of branches to market its insurance services, its chairman said.

"I would personally like to have some stake in IDBI Bank. It has been the strongest contributor to the bancassurance channel for us. This will help us to grow that part of the channel. Therefore, I would like to see that relationship going forward," said Kumar.

India's government and LIC hold over 90% stake in IDBI Bank, which had assets of over Rs 2.91 trillion ($38.91 billion) at the end of December and over 1,800 branches across the country. LIC took over the lender when it was weighed down by bad loans and needed a new infusion of capital.

The government and LIC have been looking at offloading their stake in IDBI for the past few years.

The insurer had infused Rs 4,743 crore in IDBI Bank on October 23, 2019 using policyholders' funds while the bank further raised Rs 1,435.1 crore on December 19, 2020 by way of a QIP.