LIC going Public : Govt to hold only 10 % stake ?

 

Life Insurance Corporation of India or LIC as we know it is going public soon. A major development has been initiated regarding the Initial Public Offering (IPO) of the LIC. The Government is most likely to retain only 10% stake. More than 1 Crore new Demat accounts to be opened before the launch of IPO.

History

The Life insurance Corporation of India was established on September 1, 1956, when the Parliament of India passed the Life Insurance of India Act that nationalized the insurance industry in India. Over 245 insurance companies and provident societies were merged to create the state-owned Life Insurance Corporation of India.

As of 2019, Life Insurance Corporation of India had total life fund of ₹28.3 trillion. The total value of sold policies in the year 2018-19 is ₹21.4 million. Life Insurance Corporation of India settled 26 million claims in 2018–19. It has 290 million policy holders.

LIC's slogan योगक्षेमम् वहाम्यहम (yogakshemam vahamyaham) is in Sanskrit which loosely translates into English as "Your welfare is our responsibility". This is derived from the 22nd verse of the Bhagavad Gita's 9th chapter. The slogan can be seen in the logo, written in Devanagari script. This line means "I carry what they lack, and I preserve what they have" (refers to Krishna speaking to Arjuna), when taken in context of the entire verse.

Whats happening now ?

The Finance Minister Nirmala Sitharaman had announced in her 2021 Annual Budget speech that the LIC IPO would be brought by FY22. As per reports it is said that the Department of Investment and Public Asset Management (DIPAM) has indicated that there will be a 10 % reservation for the LIC policy holders in the IPO. It is estimated that there are about 25 Cr active LIC policy holders. On the other hand there are only about 4.5 Cr Demat account holders fo far.

What this means is there is a huge chance that the number of Demat account holders is going to spike up in large numbers, some estimates say it would shoot upwords to 1 Cr new demat accounts. It can safely be assumed that most of the LIC policy holders may not have a Demat account. Since 10% of IPO is about to be reserved for the policy holders there is good chance that new demat accounts would be opened.

Its a big new for the Stock Markets as well like BSE & NSE. Imagine a crore of new demat accounts added to trade in the Stock markets. This will really make some major changes in the market. The investors would definitely increase and more people would be interested in investing.

Conclusion

We would have to wait and watch for the next moves by the government and see if the move would really work as imagined by the Govt or goes the other way round. Only time would tell if it was a positive or a negative move. What are your thoughts?