LIC policyholders may get shares at discount

A discount could be offered to small investors as the government intends to encourage participation of the common man in the highly anticipated listing, a person close to the transaction said requesting anonymity.

Policyholders of the Life Insurance Corporation of India are likely to get a discount to buy shares in the initial public offering of the country’s largest insurer, a top official said, even as the government prepares to file the offer document this week.

LIC, once listed, has the potential to become one of the biggest domestic companies by market capitalization with an estimated valuation of ₹8-10 lakh crore. (HT File)

“We have made provisions under the LIC Act that up to 10% of the issue can be offered to policyholders at some discount on the competitive basis,” said Tuhin Kanta Pandey, secretary at the department of investment and public asset management. “There will be reservation for employees also.”

A discount could be offered to small investors as the government intends to encourage participation of the common man in the highly anticipated listing, a person close to the transaction said requesting anonymity.

The government hasn’t yet disclosed the percentage of shares that will be on sale. “That we will tell in the DRHP (draft red herring prospectus),” Pandey said. “A minimum of 5% is certainly expected.”

The partial divestment of the state-owned insurer is expected to help meet the government’s trimmed disinvestment target of ₹78,000 crore in 2021-22 financial year, down from the earlier aim of ₹1.75 lakh crore.

The estimates of disinvestment targets and actual receipts could differ due to various reasons and should not be correlated with the size of LIC’s IPO, Pandey said. “Nothing stops us from going beyond ₹78,000 crore (in 2021-22) if disinvestment transactions are successfully concluded,” he said.

Policyholders will have to meet certain eligibility criteria to buy shares during the IPO, which will be announced shortly, a second person said on condition of anonymity, without elaborating.

LIC is India’s leading insurance company, with more than ₹30 lakh crore in assets under management. The number of individuals paying premium for life policies was more than 21 crore as on February 28, 2021, official data show.

Its market share in terms of the number of policies issued was 74.58% and 66.18% in terms of the first-year premium income in 2020-21.