LIC launches IPO, know why the government is selling its Golden Goose

Zindagi ke saath bhi Zindagi ke baad bhi, Life Insurance matlab LIC. For the past 66 years LIC had been catering to crores of families across the nation.

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Established with a government aid of 5 crore in 1956, LIC today holds the biggest market of its field and truly caters a feeling of na chinta na fikar to its users. Not just to policy bearers but the corporation also acts as a golden goose to the GOI too and had served it many times in the time of crisis. Be it investing around 10 lakh crores in ONGC or by helping IDBI bank to recover its losses(debt), LIC always succeeded in catering to the needs of both government and policy bearers.

Invested 22.6 lakh crores so far

Owing to the data released by RBI in the year 2019, LIC had invested around 22.6 lakh crores in the government undertaking since its inception. So far the GOI had 100% control over the company, however the central government in its recent announcement declared to sell 3.5% of its equity(IPO) in the market, which has created a lot of buzz among the commoners.

In the midst of excitement for the investment in the undertaking, the company has also been facing stiff resistance from its own employees, also it’s interesting to note here that so far the company's own employees had gone for maximum bidding(27%) for its equity.

LIC's IPO has created a strong buzz in the market Image Credits: newsncr.com

What’s the reason behind resistance?

Employees believe that the government is aiming to liberalise its golden hen and issuing of its IPO is the first step towards the direction. Also, employees feel issuing of equity might turn down the trust of its policy bearers(and are also afraid of losing their jobs as well), however, keeping all the resistance aside, the market is super excited to invest in one of the most credible organisations of the nation.

Development so far

Company launched its IPO at 10am this morning and received an enormous response from the potential stakeholders. Company issued 16,20,78,067 shares for bid in response to which around 2 crore shares got subscribed within an hour of its release. Interested one can apply for the same by 9 of this month.

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What is centre aiming for

GOI is targeting to raise around 21000 crore rupees via IPO. Once the bidding is completed the company would be enlisted in the stock market on 17 May, it is estimated that its shares might value around 902-949 rupees per share.

Should one invest in the LIC?

Before answering to this question, it must be noted here, whether you’re a policy holder or a retail investor, one needs to open a Demat account as the equity of any firm would be issued in Demat form only. Well, coming to the second part, most of the market experts have been advising to invest in the IPO of the company. Also, as per experts, it is suggested to invest in the long term as the business model for the insurance company usually goes for longer term.

Phot Credit : India Today

History

LIC owns to a very rich history, in the year 1956, it was formed by merging 245 insurance companies of the time and established an all new company naming it LIC, i.e. Life Insurance Company. Within one year of its establishment, the company made an outstanding business of 200 crores. The reason for this was that LIC had an “official credibility” and people believed that money given to LIC would never be forfeited.

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In its initial period, the company had 5 zonal offices, 33 divisional offices, 212 branch offices and one corporate office which now extends to 8 zonal offices, 113 divisional offices, 2048 branch offices and 1381 satellite offices. The company provides employment to more than a lakh people along with 12 lakh agents and holds around 30 crore policy bearers

IPO

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LIC launches IPO, know why the government is selling its Golden Goose

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