As the historic event of the Life Insurance Corporation of India (LIC) IPO is nearing, market interest in the issue has been increasing. LIC enjoys the dominant position in the insurance sector and is likely to find a place amongst India’s most valued companies, with the public issue likely to make a compelling proposition.
According to the draft initial public offering (IPO) documents filed with SEBI, the government has proposed to divest 5% of LIC’s equity through the offer for sale (OFS).
The most formidable figure, however, pertains to LIC's strategic role in the Indian equity market, even before its stock goes public. On February 14, 2022, the total market cap of 5,249 stocks listed on BSE was ₹255.4 lakh crore, of this LIC owned 3.7% ( ₹9.4 lakh crore) through its stake in various companies, as per data by brokerage Ventura Securities.
“It plays the role of a sheet anchor in the shareholding of many listed companies and works as a strong counter balancing weight against FPI (Foreign Portfolio Investors) holdings. For instance, LIC held 16.23% stake in ITC as on December 31, 2021, while FPI investors held a 9.99% stake. This is crucial considering the promoter doesn’t hold any stake in the company," the brokerage's research report added.
The major holdings of insurance behemoth includes India's top companies such as Reliance Industries in which its holds about 6.13% stake as of December 2021, Tata Consultancy Services (TCS), Infosys, State Bank of India (SBI), ITC, ICICI Bank, among others.
On the other hand, ITC, Hindustan Copper, NMDC, MTNL, Larsen & Toubro (L&T), Hindustan Aeronautics (HAL), Oil India are some of the companies in which LIC holds more than 10% stake.
Further, a whole host of companies, such as ACC, Ambuja Cements, India Cements, Bharat Bijlee, CDSL, DCM Shriram, Grasim, Mahindra and Mahindra, National Stock Exchange, Tata Steel and Tata Power amongst others, have LIC nominated directors on their boards.
“Covid-19 was a stress test for Indian life insurance companies. Given their steady performance even during such a tricky phase, they are likely to be on a firm growth path going forward. And LIC being the market leader stands the best chance to capture the future growth opportunities," Ventura Securities note added.
