LIC IPO: An overview of LIC’s financials in FY21

By Angel Broking | Published on 20th July 2021 | 92

LIC IPO: An overview of LIC’s financials in FY21

LIC of India is planning to go public by the end of this financial year. The proposed IPO is going to be the biggest share sale in India.

Per Chief Economic Adviser, K.V. Subramanian, the LIC IPO could bring in nearly Rs. 1 lakh crores for the government. For this IPO, GOI permitted to raise the authorised share capital of LIC of India to Rs. 25000 crores.

That said, let’s take a quick look at LIC’s financials in FY21 to gain an insight into its prospects and financial viability.

A quick look at LIC’s financial performance in FY21

LIC recorded a stock market profit of more than Rs. 10000 crores between April and June 2021. The registered figure is probably the highest profit for the June quarter.

By June 2021, the largest insurance company of India registered a whopping market share of 67.52% in terms of new business premium.

Notably, the sale of shares from its non-linked portfolio, inclusive of life insurance policies, account for a sizeable share of this profit. Experts think this high-profit quantum and strong financials could help attract the attention of investors on a larger scale.

The table below highlights some financial achievements favouring the success rate of this upcoming IPO –

Particulars Amount Increase % Decrease %
Total revenue Rs. 6.82 lakh crores 10.7% NA
Profit after tax (PAT) Rs. 2,900.56 crores 6.92% year-on-year NA
Net premiums Rs. 4.03 lakh crores 6.33% NA
Single premiums Rs. 1.5 lakh crores 25% NA
Renewal premiums Rs. 2.19 lakh crores 9% NA
Gross interest, rent income and dividend from investments Rs. 2.34 crores 8.33% year-on-year NA
Investment yield NA NA 0.12% at 7.42%

Here are some other financial milestones of LIC for the FY21 –

  • For FY21, LIC has a policyholder reserve worth Rs. 1,293.4 crores, whereas its cash reserves stood at Rs. 3,029.3 crores on 31 March 2021.
  • Its PAT-to-total income ratio continued to be 0.004.
  • LIC’s growth rate of the new business premiums (linked life segment) was more than 8x last year’s growth, which was 148.11%.
  • In the non-linked category, LIC’s new business pension premium surged by 32.92% against 7.55% in the previous year.
  • Its non-linked life segment contracted by 1.55%.
  • The insurer’s single premiums contributed to 37.22%.
  • LIC’s renewable premiums made up 54.34% of the total revenue from premiums.
  • The first-year premiums, accounting for 8.44% of the company’s total premium for the year, dipped by 41.4%.
  • The policyholder’s investment in government securities and bonds worth Rs. 22.93 lakh crores surged by 12.51% in a year.
  • Equity investment of policyholders worth Rs. 5.94 lakh crores increased by 79.64% in a year.
  • LIC’s gross NPA ratio dipped from 8.17% to 7.78%.
  • Its net NPA ratio stood at 0.05%, while its net retention ratio for the year was 99.89%.

Additionally, LIC’s persistency ratio in terms of annualised premium and the total number of policies for its 13th, 25th, 37th, 49th, and 61st month have improved.

Final takeaway

LIC is a debt-free company in FY21. Based on its robust financial standing and cash reserve at disposal, LIC has the financial flexibility to expand its offerings and improve its services. This could work in favour of its IPO and make the event a lucrative proposition for the company.

 

Frequently Asked Questions

  1. How much stake will the government sell for the LICIPO?

The government has not disclosed any information regarding the matter.

  1. What are LIC’s plans of investments?

LIC intends to invest more than Rs. 5 crores this FY21.

  1. When will the LIC IPO open for subscription?

LIC is yet to announce its IPO timeline.

  1. What will be the minimum lot size of LIC IPO?

This information is currently not available.