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NEW DELHI: The government-owned Life Insurance Corporation of India’s initial public offering (IPO) could be launched as early as next month. The initial public offering of over 31.6 crore shares or 5 per cent government stake would be the country’s biggest yet.
According to the LIC DRHP which was submitted to market regulator Sebi on Sunday, of the total shares offered via the IPO, up to 10% would be reserved for LIC policyholders. Further, policyholders and employees will receive a discount over the floor price, but the discount percentage is yet to be decided.
Portion reserved for retail investors:
LIC has reserved up to 35 per cent of its total IPO size for retail investors as per the draft papers, which means one could see the opening of several demat accounts as the government is expecting a lot of retail participation for the IPO.
Portion reserved for Staff, Policyholders
The draft prospectus specifies the portion reserved for employees will not exceed 5 per cent of post-offer equity share capital and may be offered at a discount. The portion reserved for policyholders will not exceed 10 per cent of the size and may also be offered at a discount. The intention behind the discounts is to encourage participation of the common man.
Portion Reserved for Anchor Investors, QIB, NII
The company will reserve 50 per cent of LIC IPO for For the Qualified Institutional Buyers (QIB). Qualified Institutional Buyers are those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital market such as mutual funds, foreign institional investors, venture capital funds, provident funds etc. They have to be registered with Sebi.
The Non-Institutional Investors (NII) quota was fixed at 15 per cent. The institutions that want to subscribe for more than Rs 2 lakh are called non-institutional investors. The difference between a QII and an NII is that the latter does not have to register with SEBI.
About 60 per cent of qualified institutional bidders portion may be allocated to anchor investors on a discretionary basis. As per the filing, if there is under-subscription for the anchor investor portion, the remaining equity shares shall be added to the net QIB portion. Any QII, who makes an application of over Rs 10 crore, is an anchor investor. Such investors typically bring in other investors as well. Bidding for anchor investors will open one working day before the bid/ offer opening date and allocation for them will be completed within the anchor investor bid / offer period. One-third of the anchor investor portion will be reserved for domestic mutual funds.
Who qualifies for the discount?
All policies other than group policies qualify for Bidding in the Policyholder Reservation Portion. Only LIC policyholders are eligible to bid under the Policyholder Reservation Portion. However, one can apply as a RIB or Non-Institutional Bidder, but they cannot avail the discount. LIC boasts of nearly 29 crore policyholders.
Eligible policies?
All policies that have not exited LIC’s records by way of maturity, surrender or by way of death of the policyholder are eligible for policyholder reservation. Also, all policies other than group policies qualify for Bidding in the Policyholder Reservation Portion.
But, what if you have submitted proposal papers before the date of DRHP, but received policy later?
You will not be eligible then. LIC says the policy should have been issued on or before the date of the prospectus (13 February) and should not have exited by way of surrender, maturity or death claim on the bid or offer opening date.
How much is the discount?
The government is yet to decide that. Eligible Policyholder(s) are offered a discount of Rs Z per Equity Share. In case, the Offer Price (the price at which shares are allotted to retail and other investors) is Rs X, Eligible Policyholder(s) will be allotted Equity Shares at ₹(X-Z)per Equity Share. For example, if the issue price is Rs 2,000 and policyholders get a discount of 10%, then he will get the share at Rs 1800.
What is the maximum allocation to a policyholder?
As per the draft prospectus, the total value of allocation to an eligible policyholder cannot exceed Rs 2 lakh after discount. Such investors can bid under the ‘Policyholder Reservation Portion’ through the applications supported by blocked amount (ASBA) and the UPI mechanism.
However, eligible Policyholder(s) can also apply for Equity Shares under the RIB category or Non-Institutional Bidders category for an additional amount of upto Rs 200,000(net of Policyholder Discount)and more than Rs 200,000(net of Policyholder Discount),respectively.
Are joint life policy holders also eligible for the discount?
If you own a joint policy of LIC, then only one of the policy members can apply under the ‘Policyholder Reservation Portion’ category and avail the discount too. The PAN number of the applicant bidding in the offer (you or your spouse) needs to be updated while linking the PAN. Also, the policy member applying for the IPO has to have a demat account in his/ her name and in case the demat account is joint, the applicant needs to be the first /primary holder of the demat account.
Can NRIs avail the discount for policyholders?
While non-resident Indians (NRIs) are eligible to invest in IPOs in India, this category is not eligible under the ‘Policyholder Reservation Portion’. So, NRIs holding an LIC policy will have to apply under the retail category.
Who else is not eligible?
The spouse of an annuity policyholder (now deceased) who is currently receiving annuities is not eligible to apply for the LIC’s equity shares in the offer.
A nominee under a policy issued by the Corporation, is not eligible to Bid for the Equity Shares under his name. only the Eligible Policyholder(s) is eligible to Bid under the Policyholder Reservation Portion.
What benefits to employees get? LIC has extended reservations to its employees in the offer.
But if the employee also holds an LIC policy?
In this instance, an individual can apply under employee, policyholder and retail portions.
“Application made in the Policyholder Reservation Portion and Employee Reservation Portion category would be considered as valid Bids and not rejected. However, applications made in the Retail Portionand Non-Institutional Portion would be considered as multiple Bids and both the Bids will be rejected,” said LIC.
According to the LIC DRHP which was submitted to market regulator Sebi on Sunday, of the total shares offered via the IPO, up to 10% would be reserved for LIC policyholders. Further, policyholders and employees will receive a discount over the floor price, but the discount percentage is yet to be decided.
Portion reserved for retail investors:
LIC has reserved up to 35 per cent of its total IPO size for retail investors as per the draft papers, which means one could see the opening of several demat accounts as the government is expecting a lot of retail participation for the IPO.
Portion reserved for Staff, Policyholders
The draft prospectus specifies the portion reserved for employees will not exceed 5 per cent of post-offer equity share capital and may be offered at a discount. The portion reserved for policyholders will not exceed 10 per cent of the size and may also be offered at a discount. The intention behind the discounts is to encourage participation of the common man.
Portion Reserved for Anchor Investors, QIB, NII
The company will reserve 50 per cent of LIC IPO for For the Qualified Institutional Buyers (QIB). Qualified Institutional Buyers are those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital market such as mutual funds, foreign institional investors, venture capital funds, provident funds etc. They have to be registered with Sebi.
The Non-Institutional Investors (NII) quota was fixed at 15 per cent. The institutions that want to subscribe for more than Rs 2 lakh are called non-institutional investors. The difference between a QII and an NII is that the latter does not have to register with SEBI.
About 60 per cent of qualified institutional bidders portion may be allocated to anchor investors on a discretionary basis. As per the filing, if there is under-subscription for the anchor investor portion, the remaining equity shares shall be added to the net QIB portion. Any QII, who makes an application of over Rs 10 crore, is an anchor investor. Such investors typically bring in other investors as well. Bidding for anchor investors will open one working day before the bid/ offer opening date and allocation for them will be completed within the anchor investor bid / offer period. One-third of the anchor investor portion will be reserved for domestic mutual funds.
Who qualifies for the discount?
All policies other than group policies qualify for Bidding in the Policyholder Reservation Portion. Only LIC policyholders are eligible to bid under the Policyholder Reservation Portion. However, one can apply as a RIB or Non-Institutional Bidder, but they cannot avail the discount. LIC boasts of nearly 29 crore policyholders.
Eligible policies?
All policies that have not exited LIC’s records by way of maturity, surrender or by way of death of the policyholder are eligible for policyholder reservation. Also, all policies other than group policies qualify for Bidding in the Policyholder Reservation Portion.
But, what if you have submitted proposal papers before the date of DRHP, but received policy later?
You will not be eligible then. LIC says the policy should have been issued on or before the date of the prospectus (13 February) and should not have exited by way of surrender, maturity or death claim on the bid or offer opening date.
How much is the discount?
The government is yet to decide that. Eligible Policyholder(s) are offered a discount of Rs Z per Equity Share. In case, the Offer Price (the price at which shares are allotted to retail and other investors) is Rs X, Eligible Policyholder(s) will be allotted Equity Shares at ₹(X-Z)per Equity Share. For example, if the issue price is Rs 2,000 and policyholders get a discount of 10%, then he will get the share at Rs 1800.
What is the maximum allocation to a policyholder?
As per the draft prospectus, the total value of allocation to an eligible policyholder cannot exceed Rs 2 lakh after discount. Such investors can bid under the ‘Policyholder Reservation Portion’ through the applications supported by blocked amount (ASBA) and the UPI mechanism.
However, eligible Policyholder(s) can also apply for Equity Shares under the RIB category or Non-Institutional Bidders category for an additional amount of upto Rs 200,000(net of Policyholder Discount)and more than Rs 200,000(net of Policyholder Discount),respectively.
Are joint life policy holders also eligible for the discount?
If you own a joint policy of LIC, then only one of the policy members can apply under the ‘Policyholder Reservation Portion’ category and avail the discount too. The PAN number of the applicant bidding in the offer (you or your spouse) needs to be updated while linking the PAN. Also, the policy member applying for the IPO has to have a demat account in his/ her name and in case the demat account is joint, the applicant needs to be the first /primary holder of the demat account.
Can NRIs avail the discount for policyholders?
While non-resident Indians (NRIs) are eligible to invest in IPOs in India, this category is not eligible under the ‘Policyholder Reservation Portion’. So, NRIs holding an LIC policy will have to apply under the retail category.
Who else is not eligible?
The spouse of an annuity policyholder (now deceased) who is currently receiving annuities is not eligible to apply for the LIC’s equity shares in the offer.
A nominee under a policy issued by the Corporation, is not eligible to Bid for the Equity Shares under his name. only the Eligible Policyholder(s) is eligible to Bid under the Policyholder Reservation Portion.
What benefits to employees get? LIC has extended reservations to its employees in the offer.
But if the employee also holds an LIC policy?
In this instance, an individual can apply under employee, policyholder and retail portions.
“Application made in the Policyholder Reservation Portion and Employee Reservation Portion category would be considered as valid Bids and not rejected. However, applications made in the Retail Portionand Non-Institutional Portion would be considered as multiple Bids and both the Bids will be rejected,” said LIC.
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