Even if we say the right size, it is still the biggest IPO. Anything bigger than this would have been difficult for the market to absorb.
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Ahead of the launch of its mega IPO, Life Insurance Corp of India (LIC) chairman M.R. Kumar spoke about the investor demand for the IPO; the insurer’s plan to retain a minority stake in IDBI Bank for its bancassurance network, why the agent network will continue to provide strong support for the company’s growth and concerns around its valuation. Edited excerpts:
What is the investor interest for the IPO looking like, especially foreign funds, given the market scenario?
Investor interest is quite good, especially from domestic investors. FIIs do have concerns about the markets, but the long-only funds don’t mind. They are not parking money to sell it in a year or so. We have received good interest from these kinds of investors.
Do you think the ₹21,000 crore public float would limit your inclusion in certain important indices such as MSCI and thus affect FII flows into your stock?
That is something that we will have to wait and see. Even if we say the right size, it is still the biggest IPO. Anything bigger than this would have been difficult for the market to absorb. So, we had to take a call. We said we do this now and then see what happens. Maybe we don’t get listed on MSCI; maybe we get listed on Sensex or Nifty or 100 or 200. We will get listed somewhere, and then we work our way upwards.
What is the stand on the sale of your stake in IDBI Bank? What are the timelines for the stake sale?
About 15-20% is something that we would like to have. This business is growing very fast. Most of the bancassurance business is through IDBI now. They (the government) have started talking to potential investors. Like the LIC IPO, that is also quite big. Not one investor can pitch in and take it all, so they will have to look at a group. They are exploring the possibilities.
What is the strategy around your product portfolio? You mentioned that you want to grow your non-participating business?
The fact is that we initially had a lot of non-participating products (in which policyholders do not participate in the profits of the life insurer) 20-25 years back. Slowly we moved, as others were moving into ULIP, etc., so we also moved. But we always felt the need for that (non-participating products). It’s easier to manage guaranteed products than paying out bonuses every year. That being the case, we moved this way because the industry was moving, and customer preferences were changing. But now, in non-participating, we do have good products. We have grown the number of policies by more than 100% in the last six months. We continue to grow fast, and we will come out with more products in this space.
With growing digitization, are you looking to reduce the dependence on your agent network?
Agency has been a strong channel for us. That is a channel that we will continue to have. Some of the investors that we met, especially the foreign investors, are quite excited about the agency channel because this is a very stable channel. And over a period of time, if you look at the stickiness that our agents have, there are people who have been there for 15-20-25 years. That stickiness helps in many ways. They look after persistency. That’s the reason why our 61st-month persistency is far better than our 13th-month persistency.
Are investors concerned about LIC’s growth and profitability prospects compared to private peers, and did that play into the valuation for the IPO?
A mature organization like LIC had not done embedded valuation at all for decades. Let’s assume they had done it 25 years back. What would have been the multiple in terms of market perception? It would probably be ahead of private players. Since we have done it for the first time, it looks as if your multiple is low. It is not low. It has already reached a certain level, and going forward, it will add up. And this is what we told the investors, and they understand that. And they also understand that new listings, even for private players 6-8 years back, were initially at similar levels.