LIC sticks with March IPO plan despite choppy markets

India’s largest insurer Life Insurance Corp. of India (LIC) has decided to go ahead with its initial public offering next month despite the volatility in markets due to geopolitical tensions.

“We are very keen on having the listing in the month of March, that’s all that I can share right now,” the state-run insurer’s chairman, M R Kumar, told reporters on Monday.

The comments came at a time the Indian government faced pressure to meet its already reduced disinvestment targets before the end of the current financial year. LIC is set to file for a Rs 60,000 crore IPO on March 11 in what is expected to be the largest in Indian history.

LIC, which filed its draft IPO papers earlier this month, will offer a 5 per cent stake or about 31 crore shares within this financial year, testing the appetite of investors. Kumar also said the insurer was well capitalised.

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“As of now, we do not believe that we require capital, we are sufficiently capitalised as we see it and going forward if there is any growth capital requirement, obviously we’ll have to approach not only the government but all the shareholders who will be part of the family by then. But going forward, I do not see any reason,” Kumar said.

He asked potential investors not to worry about government control post the IPO as decisions are taken by its board and not by the government, which will hold a 95 per cent stake post the IPO. “It will be a board-driven organisation which will take the decisions that are required to be taken,” Kumar said.

Some cheered the decision.

“The LIC listing is a very progressive move as it will lend a lot more accountability to investment allocation decisions which will now be a lot more open to public scrutiny,” said Ricky Kirpalani, the lead sponsor at First Water Capital Fund. “Raising growth capital was never the primary objective for LIC as much as raising cash in the hands of the government as its key shareholder was.”

On Monday, the insurer’s chairman also talked about how its digital transactions including premium payments rose 60 per cent in the past year as the pandemic forced people to avoid unnecessary trips outside their homes.

The growth has made LIC decide to boost its online insurance marketing and selling plans.

“I call it phy-gital and 100 per cent online services are also being made available. We expect to see a lot of digital transactions going forward,” Kumar said.

Kumar also said that to align with the private players of the sector, LIC has changed its profit-sharing ratio to 90:10 from 95:5. In other words, 90 per cent of the surplus generated by LIC will be distributed amongst the policyholders and government retains the rest.

“There is no short-changing for anybody, policy holder interests will be taken care of. There was one unified trust and we changed the rules to align ourselves with the industry for surplus distribution,” Kumar said.

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