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LIC Being Privatised? 1.20 Lakh LIC Employees Call for a Strike

16 August 20225 mins read by Angel One
LIC Being Privatised? 1.20 Lakh LIC Employees Call for a Strike
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Prior to the much-awaited LIC IPO, AIIEA (All India Insurance Employees Association) proceeded with a nationwide strike on Sunday, 13 February 2022.

Keep reading to get more details on this matter!

Do They Fear Privatisation?

Although LIC IPO will undoubtedly be the country’s greatest-ever, it’s a step towards its privatisation which might compromise the interests of this company’s policyholders.

AIIEA has declared another 2-day strike from 28 March 2022 to 29 March 2022. Employee’s Union of LIC is in favour of the strike and has stated that nearly 1.25 lakh insurance employees would be participating in the protest on the IPO launch date. They will be boycotting the IPO launch’s workday.

Besides, ten central trade unions will be cooperating with them against the Government’s privatisation spree and new labour codes.

Is the IPO Procedure Moving Forward?

On Sunday, 13 February 2022, Life Insurance Corporation filed its DRHP (Draft Red Herring Prospectus) with SEBI. Through this initial share sale, the company will be offering around 31.60 crore equity shares with a face value of Rs. 10 apiece. Through the sale of these shares, the company aims to raise around Rs. 60,000 crores – Rs. 75,000 crores.

As per the draft papers, the company has reserved 10% of the entire issue size for its policyholders, along with a discount on the issue price. The IPO is expected to get approval from market regulator SEBI (Securities and Exchange Board of India) within the coming three weeks.

Will LIC Deviate Towards the Elite?

AK Bhatnagar, Vice President of AIIEA, stated that LIC might start behaving like private companies after this IPO. He further said that this insurance giant could shift towards the society’s elite section by charging high premiums on its policies.

He even claimed that LIC might not be interested in increasing the number of policies in India. Consequently, social insurance and the economically weaker section of the society might suffer. Currently, the average premium size for the private sector is Rs. 50,000 (focusing on the creamy layer) compared to Rs. 11,000 in LIC.

Know About LIC’s History!

LIC currently operates with 13 lakh agents and 1 lakh employees throughout India. The Jawaharlal Nehru Government created this entity in 1956, after the take-over of 245 domestic and foreign companies and the nationalisation of the life insurance industry.

Its aim was to offer security to the insurance policyholders and to facilitate long-term investments with the conversion of mini-savings into capital. Its embedded value (estimated) is nearly Rs. 5.40 lakh crores.

Wrapping Up

LIC is the 3rd biggest company in the world with respect to insurance premiums. Its IPO is a significant initiative of the Government of India to raise funds amounting to $8.03 billion (Rs. 600 billion) ─ meeting the 2021-22 financial deficit target.

The Government has trimmed its privatisation and divestment plans for the financial year ending on 31 March 2022 from 1.75 trillion to Rs. 780 billion. Through the privatisation of Air India and stake sale in some public sector undertakings, it has already raised funds worth nearly Rs. 12,000 crores.

Go through Angel One blogs to get the latest updates about the stock market, IPOs and investment and similar news.

Frequently Asked Questions

1. What is the lock-in tenure for the shares bought through policyholder reservation?

LIC policyholders can immediately sell the equity shares on their listing. So, there’s no lock-in period.

2. I am an SBI Life Insurance policyholder. Can I opt for LIC’s equity shares under policyholder reservation?

No, only a policyholder of LIC can bid through the policyholder reservation quota. Moreover, you may apply through the non-institutional investor (NII) category or RII.

3. Is a Demat account mandatory to apply for LIC’s shares in the IPO?

According to SEBI ICDR guidelines, a company cannot issue its equity shares in physical form. The dematerialised form will be applicable for the issuance of shares. Therefore, retail investors or policyholders must have a Demat account to apply for the IPO.

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

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