LIC IPO: How policyholders can apply
BENGALURU: Ever since the Life Insurance Corporation (LIC) of India announced its initial public offer (IPO), there has been growing interest not just among brokers or investors but also among policyholders to participate in the offering. Since LIC is the largest company in the insurance space in India, retail investors are waiting for March (LIC is likely to launch the IPO in the first or second week of March) to pour their money into the biggest Indian IPO.
Various brokerage firms are expecting the IPO size to be upwards of Rs 80,000 crore. In terms of premium, LIC’s market share is above 64.1% and in terms of new business premium, its market share is 66.2%. There is special reservation of 10% of the issue size for policyholders, and it is also expected that the insurance giant will offer a discount on issue price exclusively for the policyholders.
Since policyholders need to link PAN with existing policies, all brokerage firms and investment platforms have been sending mails to their clients on how to link the same so that they can avail benefits under the policyholder category.
How to apply for LIC IPO?
You can login through your stockbroker’s investing portal on the mobile application or website and simply apply for the IPO. Rakesh Singh, CEO, Fisdom Stock Broking, says, most digital-led stockbrokers have an intuitive journey and given the popularity of the IPO, chances are that digital banners of the same will be plastered over all prime real estate. It will be easier to navigate to the IPO application process.
Applications Supported by Blocked Amount (ASBA) is another convenient route where there is no requirement to hold balance in a demat account. Instead, you can just block the application amount till allocation in your savings account itself. Some banks offer the ability to link the demat through their internet banking portal and complete an ASBA-based application through the internet banking portal itself.
Another option is to use UPI as payment method while applying through your stockbroker. You will need to ensure that the UPI ID is linked to your account and must authorise the UPI mandate request, he adds.
Since policyholders are showing enormous interest, brokerage firms are capitalising on it. Edelweiss Partners says the LIC IPO will offer an opportunity to activate customers who have not traded in a while, and this is a good tool to reactivate such customers.
LIC has over 28 crore policy holders and life funds of worth Rs 34.3 lakh crore. According to LIC’s draft red herring prospectus (DRHP), over 3.16 crore shares are on offer. Also, it offers a separate reservation for its employees under the Employee Reservation Portion that will not exceed 5% of its post-offer equity share capital.
Religare Broking says, IPOs in general have been receiving increased traction from investors as quality companies look to hit the bourses. Moreover, strong performance on a listing day is also luring investors to participate. LIC is experiencing even more investor interest due to strong brand connect, leadership position in the fast-growing life insurance industry and huge policyholder base.
LIC policyholders will get preferential allotment for the reserved quota. Does this imply that all policyholders will get the allotment? Religare explains that all IPO applicants get complete allotment, only in cases where the total number of bids are less than or equal to the number of shares being offered. Likewise, only in cases wherein bidding by policyholders is lower or equal to the reserved quota, all prospects may get the share.
So, if you are a policyholder and when you apply for the IPO, it doesn’t imply that all those who applied will get the allotment.Also, one can make only one application in the policyholder category. “Even if a person has multiple policies, he can only make one application,” says Mohit Mehra, Head IPO, Zerodha.
He adds that a policyholder can also apply in the individual investor category. “Although the individual investor application will not be allotted at a discounted price, it will increase the probability of getting an allotment in the IPO,” says Mehra. Are there any ways to increase the chance of allotment? Religare says the process is secured by SEBI and you cannot ascertain the outcome prior to the announcement. “The best approach should be to ensure the accuracy of the application and apply at a cut off price,” it adds.
Investment limit for retail investors
The maximum investment limit is Rs 2 lakh distinctly for applications under retail, policyholder and employee categories. For instance, a policyholder can apply for shares worth a maximum of Rs 2 lakh under the policyholder category and an additional Rs 2 lakh under the retail category.
28 crore
LIC has over 28 crore policy holders and life funds of worth Rs 34.3 lakh crore. According to LIC’s DRHP, over 3.16 crore shares are on the offer.
