How often do you come across an initial public offering (IPO) where the company’s investments are of as much interest to potential investors as its core business? But then, few boast of a portfolio with sizeable holdings in some of India’s most valuable companies—Reliance Industries, State Bank of India, and Infosys, among others.
State-owned Life Insurance Corporation of India (LIC), which filed for what could reportedly be a Rs 60,000 crore ($8 billion) share sale on Sunday, is not just India’s largest life insurer by a distance. It is also the country’s biggest asset manager. LIC’s assets under management (AUM) of ~Rs 39,60,000 crore ($526 billion), as of September 2021, outstrip India’s entire mutual fund industry by 8%.
LIC holds far more sway on India’s bourses than any other investor. As of 11 February, LIC’s equity investments were worth ~Rs 9,71,000 crore ($129 billion), according to information sourced from Prime Database, a capital markets data provider. This is more than the combined holdings of the next four largest investors. And it doesn’t include companies in which LIC holds less than 1%.
Insurers, by the very nature of their business, have to invest the premiums they collect in equity and debt. And LIC, thanks to a 65% market share by new business premium new business premium new business premium New business premium is the premium acquired from new policies for a particular year , naturally has a far bigger kitty to deploy than its peers in the private sector.
But viewed differently—and a bit crudely—LIC is a mutual fund by proxy. And a giant one at that.
By buying LIC shares, you are not just hoping to benefit from LIC’s dominance in life insurance, but you are also looking to capitalise on its investee companies’ performance.
“It’s a quasi capital markets story,” says a fund manager with a large mutual fund house. “The degree of correlation to how the markets perform is not as much [here] as in the case of an AMC AMC AMC Asset Management Company or a broker, but there is an element of that.” The fund manager and a few others The Ken spoke to for the story requested anonymity since they are not authorised to comment on the IPO.
But the impact of a rally or a slump in LIC’s investments is borne more by its policyholders than its shareholders, argues Mithil Sejpal, founder of ValuEnable, an insurance consultancy.