'Don't Worry on Government Control'; LIC is Well-Capitalised: LIC Chairman
Addressing the media and through it the public-at-large, M.R. Kumar, Chairman of Life Insurance Corp. (LIC) assured that it is "well-capitalised", and that the investors "need not worry" about the control of government of India post the proposed Initial Public Offer (IPO) expected in March, 2022.
"All of us are excited at LIC. We hope to deliver good results for our shareholders. We are well capitalised. We do not believe the company requires capital at the moment. Going forward, if there is any growth capital requirement, we will approach not only the government but all the shareholders," Kumar said.
Kumar said LIC's potential investors should not worry about government control post the IPO as decisions in the country's largest insurance company will be taken by its board and not by the government, which will hold 95 per cent of stake post the IPO.
On profitability of LIC, Kumar said, insurance companies' metrics or profits are different from others. "Our surplus was more than Rs 50,000 crore, but 95 per cent of it was going to policyholders. Going forward the surplus distribution changes from 95 per cent to 90 per cent, so profitability will also increase gradually," Kumar explained.
LIC's IPO is expected to obtain regulatory approval by the first week of March after which an indicative marketing price band will be set. LIC is planning to sell a 5 per cent stake to raise about $8 billion (around Rs 60,000 crore) in March, which could very well turn out to be the largest IPO in India, so far.
Due Diligence
When asked about LIC as an investor in several listed entities and how that could change or impact the decision of LIC as an investor, Kumar said, "We have been doing the due diligence before investing in any company. LIC will have nine independent directors besides government nominee. It is a Board-driven organisation with strong investment department and a stronger investment committee...there is no need to worry."
On his take on retaining or selling the LIC stake in IDBI bank, Kumar said: "As a chairperson, I would like to see that the relationship continues. Personally speaking, I would like to hold some stake (in IDBI). But the process would entail move from the government and DIPAM (Department of Investment and Public Asset Management)."
