Did you know that the Life Insurance Corporation of India (LIC) is amalgam from 245 entities, including 154 life insurance? They were tied together by parliamentary actions in September 1956, after several private insurance companies were found fraud. At present, more than 20 years since the private sector has entered Fray, LIC still ordered the share of 61 percent of new premiums collected and more than 72.5 percent of these policies were sold in this country.

It’s not all. LIC asset i.e. Rs 39.7 trillion, exceeding GDP from several economies. In addition, the assets are 1.1 times more than the entire MF India Industry I. Rs 31.4 trillion (until 31 March 2021). This is also equal to almost 19 percent of Indian GDP. And its equity investment, a small portion of Aum, accounted for 4 percent of the total market capitalization of all shares listed at NSE.

Obviously, when it comes to size and scale, it doesn’t get bigger than LIC. And maybe it’s a place where the challenge is located. The IPO is bound to set notes in terms of size, subscribe to retail et al, but can sail without hiccups? It remains a big question.

Mega IPO challenge

LIC IPO, no matter what assessment metrics or parameters that you use clearly will be the biggest in Indian history. Most of the estimates, even the widest, will put a range between Rs 30,000 to Rs 60,000 Crore. It was more than twice the size of Paytm (RS 18,300 Crore) or Indian coal (RS 15,200 Crore) IPO. Maximum mopping up will definitely be a high task. This, especially because the proportion provided for the individuals of 35 percent of the population, will be almost the size of the previous mega ipos.

India at the end of January 2022 has a total of 8.4 crore active Demat accounts. And it will take a minimum of around 7.5 lakh (if each invested RS 2 lakh) to more than 2 crore investors to see the offer. To put this in context, Paytm has 10.4 Lakh shareholders who invest up to RS 2 Lakh. The number for Zomato is 7.9 lakh. So we talk about big leaps for LIC.

Can you build madness to get a vast panca investor to subscribe? It remains a big question. It must be noted, that LIC has ordered 10 percent IPO for 29 crore policy holders and 5 percent for their employees. The base of the insurance policy holder is very large and has tried to make them open a demat account and subscribe to bid with lure discounts, but from what we learned, the power of his agent has not been mobilized to drive a subscription. It could be an important factor in the success of his offer.

Another Hurdle for LIC is that this is not the best time to knock on foreign money, given that foreign portfolio investors have withdrawn funds from several emerging markets, including India, in front of the possible actions of the US Federal Reserve to improve and tighten liquidity. It has also injured public market sentiment.

In addition, the life insurance business is not easy to understand and retail investors will find it difficult to assess their performance and judgment. Then, there is also a business itself. While there is a positive scale and domination, there are also some worries and triggers to weigh. Let’s look at some of these.

Pros and cons for LIC

What is clear has happened to it, is the scale, the dominant market share and the great trust of Indians in the brand. If you don’t know, LIC is a brand No. 2 in that country after Tata. And it’s a big plus.