LIC IPO: 10.8 million eligible to avail of policyholders' quota

About 10.8 million policyhol­ders of Life Insurance Corpo­ration of India (LIC) have linked their policies with PAN and have a demat account. This exud­es confidence among government and LIC officials about the subscription of policyholders’ reservation in the upcoming initial public offering (IPO). 

LIC has identified 50 million unique individuals who hold about 282 million policies. Crossing the 10-million mark for individuals who are eligible for the IPO reservation has been above the expectation, said a top government official.

LIC had over 282 million policies in force as of September 30, 2021, but policyholders tend to have more than one policy, implying that the number of unique policyholders are lower than the number of active policies.

The deadline for linking PAN with existing policies of policyholders ended on February 28. The government has reserved 10 per cent of the offer size of the LIC IPO for policyholders subject to the value of allotment of equity shares not exceeding Rs 2 lakh. To be eligible for the reservation, individuals were required to have a policy on February 13, also the day LIC filed its offer documents. 

The corporation conducted media campaigns “its best in life to be prepared,” asking policyholders to upload their personal details and PAN, and to open a demat account to subscribe to the insurer’s offer. Ultimately, it is the choice of policyholders whether they want to invest in equity market or not, the official quoted above said. Some policyholders might want to be risk averse, and do not look forward at investing in equities, he said.

“It is not right to expect all 50 million policyholders to open demat accounts, and that was never the possibility the government envisaged. The policyholder reservation was a means to reward the policyholders who have played a significant part in LIC’s journey,” the official said.

Even after years of setting up of capital markets, India has only about 80 million demat accounts, the official said. “Similarly, opening up of demat accounts for LIC IPO cannot be looked at from a different lens,” he said.

Uncertainty lingers

Although the government has been prompt with preparatory work for the IPO of LIC, geopolitical tensions have made present circumstances difficult for the public offering. The government-appointed merchant bankers have advised the Centre that current market conditions are not conducive for an IPO of any company, and pulling off the launch of country’s largest public offering will be difficult.

As the LIC IPO needs adequate support from investors, stretching the IPO launch by one or two months is expected to make the situation more conducive for the public listing, merchants bankers have stated in their interactions with the government.  

The ministerial panel or alternate mechanism is likely to meet on March 4 to decide whether the IPO can be deferred to next year, due to the volatility in stock markets on the back of a war between Russia and Ukraine. The alternate mechanism comprises of Finance Minister Nirmala Sitharaman, Road Transport Minister Nitin Gadkari, and Commerce Minister Piyush Goyal, and the panel will decide on the timeline of the IPO, and its issue size, among others.