Eligibility Criteria for LIC’s IPO Discount Explained; Get the Entire Details Here!

5 August 2022
6 mins read
Eligibility Criteria for LIC’s IPO Discount Explained; Get the Entire Details Here!

The largest life insurer of this nation has already filed its draft papers with market regulator SEBI and is likely to launch its public issue as early as March 2022.

The Government of India will offload 5% of its stake in Life Insurance Corporation (LIC), which translates to more than 316 million shares. This will make it the country’s largest-ever initial public offering to date.

LIC has also announced a discount to encourage the participation of the common people of this nation.

Read through the following sections to obtain more knowledge on this matter!

What Portion Has LIC Reserved for the Different Investor Categories?

According to its Draft Red Herring Prospectus filed with SEBI, Life Insurance Corporation’s reservations for the different investor categories participating in its initial share sale are listed below.

  • For Policyholders

LIC’s draft papers specify that the portion reserved for its policyholders participating in this public offering will not exceed 10% of the entire issue size.

  • For Employees

As per the draft prospectus of Life Insurance Corporation, a portion not exceeding 5% of the entire issue size will be reserved for its employees.

  • For Retail Individual Investors

The largest life insurance provider of India has reserved up to 35% of its IPO size for the Retail Individual Investor category.

  • For Qualified Institutional Buyers and Anchor Investors

50% of this company’s entire issue size will be reserved for Qualified Institutional Buyers, as per LIC’s draft prospectus. The company will allocate around 60% of the section reserved for QIBs to anchor investors at its own discretion.

  • For Non-Institutional Investors

The Non-Institutional Investor category has received a reservation of 15% of the entire issue size in this company’s initial share sale.

Who Can Qualify for the Discount in LIC’s Initial Public Offering?

Employees and policyholders of Life Insurance Corporation will be eligible for this IPO discount. They can bid for the shares that LIC has reserved for them in the respective categories and avail of this discount.

Any individual who is not an employee or policyholder of this company can participate in this initial share sale through the RII or NII categories. However, they will not be eligible for this discount.

Which Policies Are Eligible for This Discount?

Any policy offered by Life Insurance Corporation apart from group policies is eligible for this IPO discount. LIC currently has around 290 million policyholders.

However, the policies should not have exited the company’s records via maturity, surrender or death of the policyholder before 13 February 2022. Life Insurance Corporation filed its draft papers with SEBI on this date.

If an individual had submitted an insurance policy’s proposal papers before 13 February 2022 but received the policy later, he or she will not be eligible for this IPO discount.

So, any individual with an active LIC policy till 13 February 2022 will be able to subscribe to this IPO through the reserved policyholder category.

How Much Is This Discount in LIC’s IPO?

The Government of India has not yet decided the discount value for LIC’s employees and policyholders participating in this initial share sale. However, the procedure to calculate and avail of this discount is quite simple.
Let’s say Life Insurance Corporation fixes the offer price for each share at Rs. X and announces a discount of Y%. Here, eligible employees and policyholders will be able to obtain the shares at a value of Rs. [X – (Y% of X)].

How Is the Allocation to a Policyholder Decided?

According to Life Insurance Corporation’s draft papers, the total value of shares allocated to an eligible policyholder cannot exceed Rs. 2,00,000 after discount.

However, he or she can apply for an additional allocation of shares amounting to Rs. 2,00,000 (inclusive of discount) or more than Rs. 2,00,000 (inclusive of discount) via the RII or NII category, respectively.

Are Joint Life Insurance Policyholders Eligible for This Discount?

Only a single owner of the joint life insurance policy will be eligible for this discount under the policyholder reservation category in this initial share sale of LIC. In this case, the applicant needs to update his or her PAN while linking it. In addition, the applicant will require a Demat account and needs to be its primary holder to subscribe.

Will NRIs Be Able to Avail This Discount?

Although Non-resident Indians can apply for shares in the largest-ever public issue of this nation, they will not be allowed to participate through the policyholder reservation category. In other words, they will not be eligible to avail of this IPO discount.

However, NRIs holding a valid policy offered by this company can subscribe to this public offering via the Retail Individual Investor category.

Who Will Not Be Able to Participate in LIC’s Public Issue?

Here are the scenarios where an individual will not be able to apply for allocation in Life Insurance Corporation’s initial share.

  • If he or she is the spouse of a deceased annuity policyholder and currently reaping the benefits of annuities

  • If he or she is a nominee under any of the policies offered by this company

What If an Employee Is Also a Policyholder?

If an employee holds an active policy offered by Life Insurance Corporation, he or she can apply for allocation of shares in this initial share sale via all 3 of these reservation categories – Employees, Policyholders and Retail Individual Investors.

Final Word

The much-awaited mega IPO of this nation is just around the corner as Life Insurance Corporation has already filed its draft prospectus with market regulator SEBI. The Government of India has set its goal to meet the current financial year’s revenue estimates amounting to nearly Rs. 78,000 crores through this public issue.

As per reports, LIC currently has around 290 million active policyholders compared to only 80 million Demat accounts in this country. So, one can also expect the opening of several new Demat accounts. There were also reports of several individuals buying new policies just to participate in this initial share sale and avail of the discount.

Life Insurance Corporation has also added that if an employee with an active policy applies for allocation via both Employees and Policyholders categories, both the bids will be considered valid. However, if an individual applies through both RII and NII reservation categories, both the bids will be considered invalid and rejected.

So, if you too are keen on subscribing to LIC’s public issue, keep the above-mentioned factors in mind and do so only after conducting your own thorough research.

You can also check out Angel One blogs for more stock market, IPO and business-related news.

Frequently Asked Questions

  1. When is Life Insurance Corporation’s mega IPO opening?

Life Insurance Corporation has not yet revealed the opening date for its initial public offering.

  1. What is the price band for LIC’s IPO?

Life Insurance Corporation has not yet decided the price band of its mega public issue.

  1. When was Life Insurance Corporation founded?

Life Insurance Corporation was founded in the year of 1956.

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.