Insurance behemoth Life Insurance Corporation of India (LIC) is all set to hit the market with India’s largest ever IPO on May 4.
While the original draft red herring prospectus (DRHP) did not specify the offer size, the red herring prospectus (RHP) has now clarified the numbers.
The government will be offloading 3.5 percent of its stake in LIC. The price band has been fixed at Rs 902-949. At the upper end of the price band, the issue is valued at Rs 21,000 crore.
In a first-of-its-kind move, LIC has decided to carve out a policyholders’ quota in its public issue. So, up to 10 percent of the offer will be reserved for policyholders, retail investors’ portion will be 35 percent, while LIC employees’ quota will be up to 0.71 percent.
Are there any limits to how much I can invest?
If you are investing in any one of these reserved quotas - policyholders, employees or retail - you can at the most invest Rs 2 lakh (net of discount) through your own demat account. However, if you bid in all three quotas – policyholders, employees as well as retail investors – you get an aggregate limit of Rs 6 lakh. And if you are bidding for the shares in the employees and policyholders’ quotas, you get an aggregate limit of Rs 4 lakh. But, different quotas offer different discounts on offer price.
What are the discounts offered?
If your bid is accepted in the policyholders’ quota, your final buying price will be discounted to the extent of Rs 60 per share to the offer price. The discount is slightly less at Rs 45 per share in the employees and retail investor quotas.
So, what will be my final price?
Investors bidding through the policyholder, employees or retail quota are entitled to place their bids at the cut-off price. The cut-off price is nothing but the final share price of the company that gets realised as investors across categories put in their bids at different points within the price band (Rs 902-949 per share). On this cut-off price (offer price), shares allotted in policyholder quota will be at a discount of Rs 60 per share, shares allotted in employees and retail investor quota will get discount of Rs 45 per share. Any unused amount will be refunded to investors’ bank accounts.
Can I bid in the non-institutional portion for more shares?
Yes, you can bid for more than Rs 2 lakh worth of shares in the non-institutional quota (NII) but then you can’t bid in the retail quota. Similarly, if you bid in the retail quota, your non-institutional bid will not be accepted. And if you bid in both the quotas, both the bids will get rejected.
Also remember, there is no discount for the non-institutional portion. NII quota is typically meant for high-net worth investors (HNIs). Of the net offer, 15 percent will be reserved for non-institutional investors.
What is the minimum investment lot size?
You will have to bid for a minimum of 15 shares and beyond that in multiples of 15.
Is there a cut-off date to be considered as an eligible policyholder?
According to the DRHP filed in February, individuals who have bought their policy on or before February 13 (the date on which the DRHP was filed) can apply under the policyholder reservation portion. If you are an annuitant – that is, if you are deferred or immediate pension policyholder receiving regular pension – you, too, will be allowed to apply. But if your deceased spouse was an annuitant and you have been receiving the annuity after her death, you will not be eligible for this reservation. Those covered under group policies will not be eligible to apply under this quota.
What are the other conditions for policyholders?
If you have not updated your PAN details in LIC’s records, you will not be considered an ‘eligible’ policyholder. The last date for linking your policy with your PAN was February 28. Also note, having your own demat account is mandatory to participate in IPOs. And, as a policyholder who wishes to apply for LIC’s IPO, you should be the first accountholder in your demat account. If it is joint account, then you should be the first or primary holder.
Who is eligible to bid under the retail portion?
You can take this route if you are a resident Indian individual, Hindu Undivided Family (in the name of the Karta) or an eligible NRI. The maximum bid can be up to Rs 2 lakh, net of retail investors’ discount (Rs 45 per share).
What modes can I use to invest in the IPO?
All bidders, barring anchor investors, will have to mandatorily participate through the ASBA (application supported by blocked amount) process. You will have to make a bid-cum-application, authorising an SCSB (self-certified syndicate bank) to block the bid amount in the ASBA bank account. ASBA ensures that the investors’ application money is only debited from the bank account after her bid is finalised for share allotment.
This also covers the UPI mode, where the bid amount will be blocked after you accept the UPI mandate request. Forms that do not contain details of your depository account, DP ID, client ID, UPI ID and PAN will be rejected. You will have to either provide your bank account details (or your UPI ID if you are using this mechanism) and authorisation to block funds in your form.
You cannot provide another person’s UPI ID or bank account – such bids will be rejected. Those taking the physical application route will have to choose their forms carefully. As per LIC’s RHP, the colours of the bid-cum-application forms are green (for policyholders), pink (for employees) and white (for retail investors).