The biggest IPO of the next financial year ⁠— LIC, whose corpus is at ₹31 lakh crore

• LIC is one of the few profit making companies that the government owns.
• The value of LIC’s investment corpus is an all-time high of ₹31 lakh crore.
• It has 250 million customers – which is a lion’s market share in a poorly insured country like India.

The government just announced what is likely to be the biggest initial public offering (IPO) in the next financial year, the one from Life Insurance Corporation of India (LIC), which at least is half a century old.

After delays and disinterest in the government’s plan to sell stakes in its debt-laden companies like Air India, now the Indian government wants to unlock value in Life Insurance Corporation (LIC). This Navratna company is one of the few profit making companies that the government owns, and has always been a vital part of the government’s investment plans.

LIC is the oldest insurance company and also the largest financial institution of the country -- with a massive investment corpus of ₹31 lakh crore. Any value unlocking from this massive company will be able to fill the government’s coffers also make up for its rising fiscal deficit – the difference between its revenue collections and earnings.

To put it in perspective, India’s fiscal deficit is at around ₹9 lakh crore which is more than thrice the value of LIC’s stock holdings only. If its insurance business and its extensive coverage across the country is included, the value of this unlisted company would rise massively. It has 250 million customers – which is a lion’s market share in a poorly insured country like India.

LIC asset value at an all-time high

The timings too is no coincidence since LIC’s asset value is currently at an all-time high. In fact, the value of LIC’s stock holding is 20% of total market value of Indian stock markets. In the very last month, it booked a profit of ₹14,000 crore only from its stock market holdings for the eight months between April and November, says a report by Indian Express.

This, was in spite of the fact that LIC always bows down to government’s dictates to invest in government divestment programmes and initial public offers of state-owned companies.

Foreign investor interest

The insurance sector has been always been one of the most attractive sectors for foreign players. But it has hit an all-time high late last year, probably buoyed by the interest of millennials in insurance that opens a new vista of opportunities for the sector.

In the last one year, the exposure of foreign inflows into the sector rose 10-fold. By the end of November 2019, foreign portfolio investments in insurance stocks were at $10.5 billion. In October 2018, they were at around a billion dollars.

Both LIC’s asset value and the value of insurance in general might land a windfall for Indian government. That might save it from a sorry state that many of its company are in – high-debt and assets which are unsold.

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