As per the insurance major’s draft red herring prospectus (DRHP), which was filed on 13 February, LIC boasts of nearly 29 crore policyholders, a 74.6% market share in terms of a number of individual policies issued, and an 81.1% market share in terms of a number of group policies issued for the financial year 2021.
In a major boost to its policyholders, the company has reserved up to 10% of the offer size for this category of investors. Further, the government, which owns 100% of LIC, plans to give a discount to the policyholders in the IPO. Overall, 3.16 crore shares are on offer out of the 63.25 crore owned by the Centre.
The government hasn’t as of now disclosed the issue size and is expected to announce it in due course.
If you are an LIC policyholder and looking to invest in the IPO, here are a few things to note.
Bidding: Policyholders should note that the equity shares in the IPO will be allotted to all successful bidders only in the dematerialized form, meaning investors should have a demat account for applying in the offer.
Further, a policyholder cannot apply from the demat account of his or her spouse or son or a relative.
Policyholders bidding under the ‘Policyholder Reservation Portion’ can bid through the Applications Supported by Blocked Amount (ASBA) and the UPI mechanism.
As per the draft prospectus, the total value of allocation to an eligible policyholder cannot exceed ₹2 lakh after discount. Bidding in IPOs is done in a ‘lot’, which is the minimum number of shares that an investor needs to bid for. The number of shares in a ‘lot’ depends on the issue price offered by the company.
While non-resident Indians (NRIs) are eligible to invest in IPOs in India, this category is not eligible under the ‘Policyholder Reservation Portion’. Therefore, NRIs holding LIC policy will have to apply under the retail category.
Joint life policy: Only one of the two policyholders can apply for the equity shares under the ‘Policyholder Reservation Portion’ category. The PAN number of the applicant bidding in the offer (you or your spouse) needs to be updated in the policy records.
The applicant 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.
Additionally, the proposer of a policy for a minor is eligible for reservation under the Policyholder Reservation Portion.
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.
However, what if you have submitted proposal papers before the date of DRHP, but received policy bond later. According to LIC, to be eligible, the policy should have been issued on or before the date of the prospectus and should not have exited by way of surrender, maturity or death claim on the bid or offer opening date.
Further, the spouse of the policyholder who is now deceased and is currently receiving annuities is not eligible to apply in the offer under the category. Also, nominees under the policies are not eligible.
Bidding scenarios: LIC has also extended reservations to its employees in the offer. However, there might be instances where an 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, Employee Reservation Portion and Retail Portion – here all three bids would be considered as valid applications and will not be rejected as multiple bids,” LIC calcified in the prospectus. However, the individual cannot then bid under the non-institutional portion.
If an individual applies under policyholder, employee, retail and non- institutional portions, then application only made in the policyholder and employee categories would be considered and applications made in the retail and non-Institutional portions would be considered as multiple Bids and both the bids will be rejected.
Lock-in period: There is no lock-in period and the policyholders can sell the equity shares immediately on the listing of the equity shares if they choose to do so.
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