Insurance behemoth Life Insurance Corporation (LIC) is likely to come out with its initial public offering (IPO) in March. Its draft red herring prospectus (DRHP) does not specify the size, but the central government is most likely to offload 31.6 crore shares or 5 percent of its stake in the company.

Besides the enormous issue size- estimated to be anywhere between Rs 50,000 crore to Rs 90,000 crore – the IPO is also being talked about for the unique quota it has created.

In a unique and novel move in the primary markets, LIC has decided to create a unique policyholders' quota in its public issue. While the exact portion is yet to be finalized, it can go up to 10 percent of the issue.

However, as a policyholder, you need to fulfill a few conditions to be eligible for the reservation.

Has any specific quota of shares been reserved for policyholders in the issue?

LIC has not exactly stated the exact quota of shares to be reserved for policyholders. However, the threshold is 10 per cent as stated in the DRHP. The quantum of investment under the policyholders’ category is restricted to Rs 2 Lakhs.

Who are the eligible policyholders that can bid?

LIC policyholders whose policies have not matured, been surrendered, or terminated by way of death shall be eligible for policyholder reservation. All policies should have been in force by the DRHP date, i.e. 13th February 2022. However, only original policyholders whose names appear in LIC records will be eligible, beneficiaries including the spouse of a deceased policyholder shall be ineligible to apply under the category.

Will those applying in the policyholders’ category get any discount and what would be the quantum?

Yes, there is a provision in the DRHP that states that the existing policyholders’ would get a discount. However, LIC has not clearly specified the same so far. If finalized, it will be revealed at least two working days before the bid opening date. Any discount would be a good discount according to prominent market sources.

Is updating PAN on the LIC website mandatory?

Updating PAN in LIC's records is mandatory to avail of the benefits of the category.

The process was required to complete by February 28th. If you failed to do so you will not be considered an ‘eligible policyholder’ as clarified by LIC.

Is having a Demat Account in your own name mandatory before applying?

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

Can joint-life policyholders apply?

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

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

  • The policyholder reservation portion shall not exceed 10 percent of the book size.
  • Policyholders can apply for equity shares in multiples such that their bid amount does not exceed Rs 2,00,000, a net policyholder discount.
  • However, policyholders can also apply 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 off policyholder discounts.

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

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

Are LIC employees eligible to bid?

Yes, employees of LIC can bid in the IPO. If an employee is also a policyholder, he/she can apply under three categories namely, the employee, policyholder, and retail categories. LIC has clarified in its DRHP that applications under these categories will be considered valid applications and not be rejected as multiple bids.

However, if a person were to apply under any other additional category other than above i.e. policyholder, employee, retail, and non-institutional, only the applications under the employee and policyholder categories would be considered and the remaining two would be rejected.

Can policyholders who live abroad apply under the quota?

No. Only resident Indians are allowed to bid under the quota.

Is it possible to link PAN to a LIC policy through a LIC agent?

Yes, you can ask an agent to help you with updating your PAN details in your LIC policy account. Moreover, the LIC-PAN linking process is really simple and easy. You can do it yourself using your smartphone or a computer. 

Enter LIC policy number, PAN, registered mobile number, and e-mail address after clicking 'Online PAN registration'. Generate and enter the OTP received on your registered mobile number. Once complete, a confirmation message shall be generated that the PAN Card details have been updated successfully. 

LIC's IPO launch is expected to be an important financial event that has attracted keen interest from both investors and LIC policyholders and with good reason.

FAQS  LIC IPO- Policyholder Category

1: What is the date of the LIC IPO?

The IPO start date is 10th March 2022 and the last date to bid is 14th March 2022.

2: What is the LIC IPO price?

LIC will be offering a discount of 10% to the existing policyholders and employees. Thus, before the discount, the price is expected to be Rs. 2,100 and after discount the price is Rs. 1,980