An Investor's Guide to LIC IPO

Shreya Anaokar Shreya Anaokar 2nd June 2022 - 04:05 pm

On February 13 2022, Life Insurance Corporation of India (LIC) filed the Draft Red Herring Prospectus (DRHP) with the market regulator for its mega initial public offering.

Before investing into the IPO one must understand the Company and to understand the Company one should be able to read the DRHP of the Company.

But LIC DRHP is about 649 pages long.

So here is a guide for you to navigate through the 649 pages of LIC DRHP:

The non-numbered first two pages of DRHP contains the most important summary of the entire issue with respect to the amount of shares being sold or fresh equity being issued. It gives the information of the existing investors who are selling their stake in the IPO and how many shares they are proposing to sell.

Further, any reservations in the IPO made for LIC’s employees or its policyholders will also be found on this page. The company will also mention the risks in relation to the offer and general risks involved in participating in the IPO on this page.

Lastly the page will contain the names of the Book Running Lead Managers (BRLMs) of the issue and the registrar of the issue.

Pages 1-22

These pages will contain the standard disclaimers on any forward-looking statements made by the company in the rest of the DRHP, certain abbreviations and definitions that investors should know and guide to how financial and market data are presented.

Pages 23-66

These pages talk about the risk factors involved in participating in LIC’s public issue. These risk factors appraise prospective investors of the various causes and events that could harm the company’s business and its ability to remain as a ‘going concern’. This section is important for investors to have a firm understanding of the risks that the company deals with and the risks that the industry in which the company operates faces.

Pages 67-105

On these pages you will be given an overview about the LIC, its industry, a summary of latest financial statements and the objectives of the issue. Investors will also learn the capital structure of the company and general information such as registered office address.

Page 106-299

The following pages will give you all the information you need to know about LIC. The history of the company, Background, certain corporate matters, its management, its board, any group companies or subsidiaries LIC has and dividend policy.

Check - 10 Things to know before investing in LIC IPO

Pages 300-503

These pages contain detailed tables of the three most important Financial statements: Income statement, Cash flow and balance sheet. This section also contains the management’s discussion and analysis of LIC’s financial statements much like it is the case in annual reports of listed entities.

Pages 504-546

Under these pages, investors can find all the legal issues that LIC is entangled in such as outstanding litigations against it or those it has filed against others. Also, investors will learn about the various approvals the government has granted LIC for running its business and other regulatory disclosures it is required to make under SEBI rules.

Pages 547-578

These pages contain the information related to the public issue LIC is proposing. Investors can find information related to the terms of offer, the procedure to apply in the offer, and some guidelines on restrictions of foreign ownership in Indian securities.

Pages 579-581

Contain a brief introduction to certain provisions of the Life Insurance Corporation Act that company has set out for the public as important.

Pages 582-630

In the following pages, investors will learn about the core of LIC through the embedded value (EV) that has been submitted by the independent actuary to the company.

The report will provide details on LIC’s Net worth, Value of In-force business, and Value of New Business. The auditor will likely suggest you to go through the report’s Reliance and Limitations section as well as read the report in conjunction with the rest of the DRHP.

Pages 631-649

This part contains information about several contracts that LIC has entered into or is about to enter that could be material for the company’s investors. These documents will be available for verification at the LIC’s Central office till the close of the issue.