We’ve come to the concluding chapter of our investing series on LIC’s Road to IPO. In this chapter, we look at the Life Insurance Corporation of India’s investments and why it’s important for you to know.
LIC is the biggest market player in the insurance sector with over 66% market share. It has over 29crore policyholders with 37.94 crore policies in force. So it’s safe to say that LIC generates a huge sum in revenues as premiums.
Have you ever wondered what LIC does with the money it generates?
It does not keep the money idle in the lockers. Well, if LIC kept the money in the locker, how would you get your sum assured? It invests in equities, mutual funds, government bonds, lends to individuals, and more.
This is just like banks make use of the deposits to issue loans and invest in the capital markets.
Per Prime Info Database’s recent study, LIC owned over 1% stake in 278 NSE-listed companies as of December 31. It alone held 77% share of investments in equities by insurance companies.
Look at LIC’s Holdings
You may not know but not only is LIC the #1 insurance player, but it is also the biggest domestic institutional investor (DII). At the end of Q3, LICs equity investments slid to 3.67%, its lowest ever. However, the investment value jumped 1.46% to reach Rs. 9.53 lakh crore.
LIC holds a major stake in IDBI bank at 49.24%. It invested in IDBI when it was troubled with losses. When the bank had over quarter of the book consisting bad loans, LIC invested Rs. 21,600crores for a 51% stake in IDBI. LIC claimed it was a strategic investment in a bank selling insurance. This investment provided the insurer with a pool of IDBI’s 800 branches to sell LIC insurance policies.
In value terms, LIC held Rs. 95,274crores in the country’s most valuable company Reliance industries at the end of Q3FY22. Next biggest investments are in the top two IT firms in India. LIC held Rs. 95,488crores worth of investments in TCS and Infosys combined.
There are many other companies LIC invests in. Deepak Nitrite, JSW Steel, Coforge, Power Grid, Hindustan Motors, Sterlite Technologies, Central Bank of India, Steel Authority of India, and Bombay Dyeing are also part of the LICs equity portfolio.
In fact, LIC increased its stake in Deepak Nitrite in the December quarter. This was a strategic move as the specialty chemical player was available at a bargain.
Long story short, LIC invests in most of the companies you know or have heard of. Also, if an institution like LIC strategically invests in equity markets to maintain and grow its wealth, this should increase your faith in this asset class. Click here to know a strategic investment plan to create wealth.
At the time of writing this article, LIC’s newly rejigged board was expected to meet to decide on the Country’s biggest IPO ever. The insurer is expected to file its DRHP with the market regulator SEBI after the board approval.
Per brokerages, LIC is expected to be valued around Rs. 13-15 lakh crore, with the insurance titan raising between Rs. 70,000 and Rs. 1,00,000 crore from the public issue.
The LICs IPO is most-watched for one more reason. As you are aware, LIC policyholders will get the shares at a discounted price, this move will translate into the addition of new Demat accounts.
The government is expecting at least 1 crore new Demat accounts to open post the launch of LIC IPO.
We hope equity markets become a household thing for most investors and they consider investing to create long-term wealth.
Let us know if you are planning to invest in the LIC IPO.
In the meantime, subscribe to our 5 in 5 Wealth Creation Strategy to strategically invest in the already listed companies.
I’m Vinay Mahindrakar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.