Life Insurance Corporation (LIC), the Public sector company, is in the process of improving its asset quality in view of its upcoming initial public offering (IPO). The dates for the IPO has not yet been revealed. As per the latest annual report of LIC, the non-performing assets (NPAs) of the company was at Rs 35,129.89 crore as of March 31, 2021. At the same time, LIC’s total portfolio was Rs 4,51,303.30 crore. As per the guidelines of the Insurance Regulatory and Development Authority of India (IRDA), LIC has created a provision of Rs 34,934.97 crore for the NPAs.
LIC is India’s largest insurance company LIC now had a gross NPA ratio of 7.78 per cent by the end of March 31, 2021. LIC’s net NPA was at 0.05 per cent. The company’s Gross NPAs as a percentage of its loan portfolio stood at 8.17 per cent, while net NPAs stood at 0.79 per cent a year ago. In real terms, the NPA of LIC in the year 2019-20 was Rs 36,694.20 crore and its total debt was Rs 4,49,364.87 crore. The extent of credit stress for insurance companies differs from that of banks. LIC has generally been making full provisions for all its NPAs.
LIC’s annual report says, “The management has reviewed the asset quality and performance on the real estate, debt and investment fronts. Financial provisions have also been made wherever necessary.” LIC is preparing to launch its IPO in the next few months. The government has also made necessary legal amendments for the public insurance company to be listed in the market.
Government to keep 75 per cent stake in LIC for the next five years
According to this amendment, the government will hold a 75 per cent stake in LIC for the next five years and then bring it down to a minimum of 51 per cent. As per the amended law, the authorized share capital of LIC will be Rs 25,000 crore, which will be divided into 2,500 crore shares of Rs 10 each. Ten per cent of the shares in the IPO will be reserved for existing insurers. The market valuation of LIC is estimated to be around Rs 8-10 lakh crore after the IPO comes out and gets listed in the market.