The government is offering a 3.5% stake in what will be India’s largest share sale, despite both the size and valuation of the issue being slashed significantly to reflect current market conditions.
The issue was fully subscribed on Thursday, a day after it opened for sale to retail investors, employees and policy holders.
What are the details of the IPO?
The date for share listing is 17 May, the government’s Department of Investment and Public Asset Management said.
Bids for anchor investors opened on 2 May but share sale for the public opened on 4 May and would close on 9 May.
General investors can buy equity shares at a price band set at $11.75-12.36 (£9.38-9.87) per share.
Why does LIC matter?
LIC is nearly as old as independent India. Formed by nationalising and merging 245 private insurance companies, it started issuing policies in 1956, holding a monopoly on India’s insurance sector until the turn of the millennium.
More than two decades after private competition was allowed, LIC continues to hold a leadership position, with 66% market share as of 2021.
Its sheer size makes the insurance behemoth a systemically important company for India.
Why is LIC a part of India’s social fabric?
With 1.3 million distributors selling policies across pretty much every nook and corner in India, the ubiquitous “LIC agent” has held a unique place in independent India’s public consciousness.
Agents like him have been critical to the company’s growth and mission to build trust and create a savings culture across the remote corners of the country.
“People didn’t buy policies from me just as insurance, they did it as an investment. For their kids’ education or wedding. They trusted their life savings with me,” said Naidu.
What does the IPO mean for LIC?
In the long run, a stock market listing is expected to improve how the firm is run and bring in more transparency.
“On the margin front, it will be kind of hard for LIC to compete if it sticks to the distributor model. They will have to re-innovate the company and become relevant for what the insurance market will be tomorrow,” says Nikhil Kamath, co-founder of Zerodha.
According to economic commentator Vivek Kaul, LIC pays agents twice as much in commissions in the first year, compared to private insurers, which is not sustainable in the longer run.
But at a time when its competitors have all gone digital, LIC’s overt dependence on physical distributors has been flagged as a cause of concern by analysts, who believe it will continue losing market share in the years ahead.
