The government has been working on an ESG grading for LIC ahead of its IPO

7 January 2022
4 mins read
The government has been working on an ESG grading for LIC ahead of its IPO

According to reports, the finance ministry wants to send a statement that the insurance giant is better positioned to forecast future dangers and possibilities. The ESG score instructions to IPO executives come at a time when SEBI is looking at regulatory and supervisory measures for ESG issuers.

The term “ESG rating” refers to the public publication of information about a company’s environmental, social, and governance performance. Investors are increasingly looking for firms that comply with inclusive growth principles, therefore the majority of the world’s leading corporations declare their ESG performance.

An analyst said, “An ESG tag helps establish a devoted pool of investors since it is now an internationally recognized baseline for fundraisings. LIC will be India’s biggest initial public offering. If it is labeled with ESG, it will almost certainly increase its value.”

Companies that score highly on ESG criteria are seen to be better at predicting future risks and opportunities, more inclined to long-term strategic thinking, and more focused on long-term wealth development. Last month, government officials and book runners met with long-term global investors to gauge interest in the massive IPO, which is anticipated to take place this fiscal year.

For the fiscal year 2022, the IPO is seen as critical to the Indian government’s budget deficit problems. The administration wants to introduce the issue by March, and a commission led by the finance minister is expected to make the ultimate decision. The government has a 100% share in the insurance behemoth.

With a high ESG score, LIC will be able to attract bigger and more responsible pools of money committed to firms that follow ESG guidelines. SEBI has been pressuring listed businesses to meet stringent ESG disclosure requirements.

“The introduction of the BRSR (Business Responsibility and Sustainability Report) and the launch of ESG mutual fund schemes have sparked interest in ESG ratings as a means for listed issuers to truly incorporate ESG into their investment choices,” SEBI’s chairman stated last month.

The assets of LIC, valued at $463 billion, surpassed the GDP of some countries

At $463 billion, LIC assets surpass the GDP of some countries, and it is rated 5th in terms of life insurance GWP and 10th in terms of total assets internationally. It has 1.1 times the assets of the whole Indian mutual fund sector, i.e. Rs 31.4 trillion (till March 31, 2021).

LIC owns 4% of the overall market capitalization of the NSE. With Rs 36.7 trillion in assets under management, LIC is India’s biggest asset manager. For FY21, LIC’s AUM was equivalent to 18% of India’s GDP on a standalone basis.

It has been providing life insurance in India for over 65 years and is the country’s largest life insurer in terms of Gross Written Premium (GWP) with a market share of 64.1 percent, New Business Premium (NBP) with a market share of 66.2 percent, number of individual policies issued with a market share of 74.6 percent, and number of group policies issued with a market share of 81.1 percent in fiscal 2021.

On a standalone basis, LIC is India’s biggest asset manager, with an AUM of about Rs 36.7 trillion (comprising policyholders’ investment, shareholders’ investment, and assets held to meet associated obligations) as of March 31, 2021.

As of September 30, 2021, LIC’s equity investments in India totaled 7.62 percent of the outstanding market capitalization (non-promoter market cap in India). LIC’s individual product portfolio in India consisted of 32 individual products and seven individual riders as of September 30, 2021, while its group product portfolio in India consisted of 10 group products, one of which was a group microinsurance product.

According to NBP, LIC’s market share in the Indian Life Insurance Industry was 66.2 percent in Fiscal 2021, and its NBP was 1.96 times that of the overall private life insurance industry and 8.9 times that of the second-biggest player. Individual business is predicted to increase at a CAGR of about 18 percent from Fiscal 2021 to Fiscal 2026, compared to a CAGR of 17 percent for group business during the same time period.

Source: Economic Times

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