Are PMJJBY holders eligible for LIC IPO at a discount?

According to the Draft Red Herring Prospectus (DRHP) submitted by Life Insurance Corporation of India with the market regulator SEBI recently, 10 percent of the total LIC share offer will be kept reserved for the LIC policyholders but the question arises here is are the policy holders of government insurance schemes like Pradhan Mantri Jeevan Jyoti Beema Yojana (PMJJBY) are they eligible for LIC initial public offering at a discount?

Chairman of LIC M R Kumar announced on Monday 21st February 2022 that Subscribers of Pradhan Mantri Jeevan Jyoti Beema Yojana (PMJJBY) are eligible for LIC IPO at a discount.

Pradhan Mantri Jeevan Jyoti Beema Yojana (PMJJBY) was launched in 2015 and it offers a renewable one year life cover of Rs.2 lakh to all savings bank account holders in the age group of 18-50 years, covering death due to any reason, for a premium of Rs.330 per annum per subscriber.

This government scheme is offered or administered through LIC. As per the Draft Red Herring Prospectus (DRHP), the maximum bid amount under the Policyholder Reservation Portion by an eligible policyholder would not exceed Rs.2,00,000 (net of policyholder discount).

It further says that the policyholders having one or more policies of LIC as on the date of DRHP and bid/offer opening date and who are residents of India will be eligible to apply in this offer, under the Policyholder Reservation Portion.

The aggregate of reservation for eligible policyholders shall not exceed 10 percent of the total offer size. The portion of the offer available for allocation to eligible policyholders on a proportionate basis is subject to the receipt of necessary approvals from the government.

LIC issued approximately 21 million individual policies in FY-2021, accounting for nearly 75 percent of new individual policy issuances. The IPO is offer for sale (OFS) by the Government of India. There is no fresh issue of shares by LIC.

Once listed, LIC’s market valuation would be comparable to mammoth companies like Reliance Industries and Tata Consultancy Services.

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