LIC IPO: Chairman MR Kumar says company is 'well capitalised'
Kumar said that the company is keen to list in March
The profitability of any insurance company is different from others
LIC may not sell its entire stake in IDBI Bank
Life Insurance Corporation of India (LIC) chairman MR Kumar, on Monday, said that the company is well capitalised as it prepares for the largest initial public offering in the country next month.
Kumar said that they are watching the geopolitical developments closely as the company is keen to list in March. Addressing the press conference, ahead of the issue launch, he said the IPO is getting a lot of traction from policyholders.
"As of now, I do not believe that we require capital. Going forward if there is any growth capital requirement, we will approach not only the government but all the shareholders," he said.
The Chairman assured that LIC’s potential investors should not worry about government control post the IPO as decisions in the company are taken by its board, not by the government, which will hold 95% of the stake after the public issue.
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Speaking on the profitability of LIC, Kumar said, "The profitability of any insurance company is different from others. Our surplus was more than Rs 50,000 crore, but 95% of it was going to policyholders. Going forward, the surplus distribution changes from 95% to 90%, so profitability will also increase gradually".
He stated that LIC was developing new products including some participating (par) and non-participating (non-par) policies, which would be released in the future.
Chairman said that LIC may not sell its entire stake in IDBI Bank and can use its large network of branches to market its insurance services.
IDBI bank has been the strongest contributor to the bancassurance channel for LIC and he would personally like to have some stake in it, said Kumar. On the other hand, the government is expected to commence the stake sale process soon.
The government of India and LIC hold over 90% stake in IDBI Bank, which had assets of over Rs 2.91 trillion ($38.91 billion) at the end of December and more than 1,800 branches across the country. LIC acquired a lender when it was weighed down by bad loans and needed a new infusion of capital.
For the past few years, the government and LIC have been looking at diluting their stake in IDBI Bank.
On October 23, 2019, the insurer advanced Rs 4,743 crore to IDBI Bank using policyholder funds, and the bank further raised Rs 1,435.1 crore on December 19, 2020, through QIPs.
LIC filed the draft prospectus with the SEBI this month to sell a 5% stake to raise about $8 billion, making it the largest IPO in India so far. LIC’s IPO is expected to receive regulatory approval by the first week of March after which an indicative marketing price band will be set.