The IPO-bound LIC’s $130B equity holdings are its magic potion—and its Achilles’ heel
Much more ink has been spilt over State-owned Life Insurance Corporation of India’s (LIC) initial public offer. And rightly so.
The government is an interested party as it will reportedly reap as much as $8 billion by selling a mere 5% stake. Investors are eyeing a slice of a company that controls a mammoth two-thirds (roughly) of the insurance market. And the common man is interested simply because, well, LIC has been a trusted household name for generations.
LIC is more than a mere insurance company, though. It is also the country’s biggest asset manager. Its assets under management (AUM) of about $526 billion, as of September 2021, outstrip India’s entire mutual fund industry by 8%. It has a stake in nearly 280 listed companies, including in 28 of the 30 marquee companies on the Sensex. It also helps that LIC has a reputation as a shrewd investor. It rode the post-Covid recovery in the stock market to, reportedly, post a record profit in the April-June quarter last year.
Investing in LIC, therefore, lets one benefit from its dominance in life insurance and capitalise on its investee companies’ performance. But (and there always is one), one has to quote the sleeper-hit
Khosla ka Ghosla to ask LIC, “Aap party hain ya broker?” (Are you the principal or the agent?)
Because, as shrewd an investor as it may be, LIC will still be 95% State-owned and will remain the government’s investor of last resort. That means its portfolio will always include bailed out companies (like IDBI Bank), rescue attempts (like IL&FS), perpetual laggards (like MTNL) and whichever firm takes the Centre’s fancy—whether LIC or its new shareholders like it or not.
Still, let’s say you have faith in LIC’s track record as an independent investor. In that case, do you think you stand to enjoy LIC’s investment gains more as a policyholder or a shareholder?
The answer may surprise you in our today's article on subject matters deftly decipher the conundrum that is LIC. If you are considering buying shares or must read our last article before the IPO, this is it to go ahead
LIC inbound IPO