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Policyholders with PM life insurance are not eligible for discounted shares

09 August 20224 mins read by Angel One
Policyholders with PM life insurance are not eligible for discounted shares
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LIC, the IPO-bound insurer giant, said on 22nd February that members of the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) will not be qualified for discounted shares in the upcoming initial public offering. “It is a collective insurance policy, and PMJJBY customers are not qualified,” the state-run firm said in a statement.

The clarification comes a day after LIC Chairman M R Kumar said that PMJJBY subscribers are also entitled to policyholder benefits. However, LIC said that it was “inadvertently referenced” in the statement. As per the DRHP issued this week, an eligible policyholder’s maximum bid amount under the Policyholder Reservation Portion will not exceed Rs 2,00,000. (net of policyholder discount).

To facilitate the IPO, LIC’s share capital was boosted from Rs 100 crore to Rs 6,325 crore in September last year. The DRHP, which was filed with the market regulator SEBI on February 13, said that the offer is for the sale of a 5% interest by the government for an estimated Rs 63,000 crore.

Finance Minister Nirmala Sitharaman told reporters in Mumbai earlier today that the planned LIC IPO is generating a lot of interest and excitement in the market.

“There is a lot of excitement and interest in the market now that the DRHP has been released. I like how it’s written in such a manner that shareholders have a say. The way it’s been put together has piqued people’s attention, so we’ll go ahead and do it,” according to Sitharaman.

Concerns about the government’s role as the LIC IPO approaches

According to reports, potential investors in Life Insurance Corp of India’s $8 billion Initial Public Offering want guarantees from the company’s management that it would not put their interests at risk to accomplish the targets set by the government, the company’s majority shareholder.

LIC management and IPO bankers have been bombarded with queries about the insurer’s previous investments and their quality during virtual roadshows for India’s largest-ever public offering, according to sources.

LIC has been a big buyer of shares in government enterprises that have been disposed of by New Delhi in recent times, often rescuing out less-than-successful initial public offerings. It’s also been used to rescue troubled financial institutions. According to insiders, the IPO roadshows, which began last week and are expected to go through the end of the month, are concentrating on possible conflicts of interest.

Experts said, “The government tends to behave as a regulator, management, and shareholder, and it tends to get its position muddled at various periods in time.” “Government ministries may believe that LIC is completely under their control and would want to exercise that type of influence whenever they see fit, which is a source of worry for investors,” experts noted.

The effectiveness with which LIC and its investment bankers handle investor worries will help determine the insurer’s value in the float, and hence the status of the Indian government’s finances, which is counting on the IPO funds to bridge an annual budget deficit hole.

The insurer listed government engagement as a risk factor in its draft prospectus, saying that minority shareholders might be harmed by government action. The government owns 100% of LIC presently and will control around 95% after the IPO.

M R Kumar, the chairman of the LIC, said at a press conference on Monday that prospective investors need not be concerned about government control after the IPO since the company’s board, not the government, makes decisions.

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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