Here’s What You Need to Know About the LIC IPO as a Policyholder

To raise some much-need cash to refill the public coffers post the ill effects of the pandemic, the government is planning one of India’s biggest IPO listings. The state-run Life Insurance Corporation of India (LIC) recently filed a draft red herring prospectus (DRHP) with the capital markets regulator SEBI. The government, which owns a 100% stake in the company, is offering Rs.31.62 crore equity shares in the IPO and plans to sell a 5% stake.

The company has reserved 10% of its offer size for its policyholders; the number currently stands at a whopping 29 crore. Here’s what policyholders need to know about the IPO.

Who are the eligible policyholders that can bid?

LIC policyholders whose policies have not matured, been surrendered, or terminated by way of death will be eligible for policyholder reservation. All policies should have been issued and be in force by the DRHP date, i.e. 13th February 2022. However, the spouse of a deceased policyholder receiving annuities will not be eligible to apply in the offer under the policyholders’ category.

Can non-resident Indians (NRIs) also bid? Yes, NRIs can also invest in the IPO, but not under the Policyholder Reservation Portion category. They will need to apply under the retail category.

Can joint-life policyholders apply?

In the case of joint-life policies, either one of the two policyholders can apply under the Policyholder Reservation Portion. The PAN of the applicant will need to be updated in the policy records. If the policyholder is a minor, then the proposer of the policy is eligible for reservation under the Policyholder Reservation Portion.

Is it mandatory for applicants to have a Demat account?

Yes, all applicants will need to have a Demat account in their name, as all equity shares allotted to successful bidders will be in a dematerialised form as per SEBI ICDR regulations. If the Demat account is in joint names, the applicant will need to ensure that they are the first or primary holder of the Demat account. 

How can policyholders bid?

Under the Policyholder Reservation Portion, policyholders can bid through the Applications Supported by Blocked Amount (ASBA) as well as the UPI mechanism. The total value of allocation cannot exceed Rs.2 lakh after discount, according to the DRHP. The bidding will be done in a lot, which is the minimum number of shares a policyholder can bid for and depends on the company’s issue price. 

What is the maximum amount eligible policyholders can apply under the Policyholder Reservation Portion?

The Policyholder Reservation Portion will not exceed 10% of the book size. Policyholders can apply for equity shares in multiples such that their bid amount does not exceed Rs.2,00,000, net of the policyholder discount.

However, policyholders can also apply for shares under the Retail Individual Bidders (RIB) or Non-Institutional Bidders category for additional amounts of up to Rs.2,00,000 and more than Rs.2,00,000, respectively. Both limits will be net of policyholder discount.

Is the allotment to policyholder applicants guaranteed under the Policyholder Reservation Portion?

No, the allotment to policyholders is not guaranteed. Only 10% of the offered size is reserved for eligible policyholders and will be subject to competitive bidding and the demand in the bidding process.

Will there be a lock-in period?

No, there will be no lock-in period, and policyholders can sell their equity shares immediately post the listing of the equity shares.

Are LIC employees eligible to bid?

Yes, employees of LIC can bid in the IPO. If an employee is also a policyholder, they can apply under the employee, policyholder, and retail categories. LIC has clarified in its RHDP that applications made in all three categories will be considered valid applications and not be rejected as multiple bids.

However, if a person were to apply under four categories, i.e. policyholder, employee, retail, and non-institutional, only the application made under the policyholder and employee categories would be considered. The remaining two would be rejected.

For any clarifications/feedback on the topic, please contact the writer at athena.rebello@cleartax.in.