LIC IPO: PM Jeevan Jyoti policyholders not eligible, here’s why

Life Insurance Corporation of India (LIC) has clarified that policyholders of Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) are not eligible to bid for shares at discounted prices from the policyholder reservation portion in its upcoming initial public offering.

The clarification comes in the backdrop of reports that the policyholders under this particular scheme can apply for the discounted shares under the reserved category, despite stipulations penned in the draft red herring prospectus (DRHP) by the insurance behemoth stating otherwise.

As per the DRHP filed with the markets regulator Securities and Exchange Board of India on February 13, 2022, eligible policyholders encompass those who have one or more policies of LIC as on the date of the DRHP and bid/offer opening date and are residents of India. Only these policy holders would be eligible to apply under the policyholder reservation portion under this IPO.

The definition categorically mentions that the non-individual policyholders and persons not eligible under applicable laws, rules and regulations are not eligible to apply under the policyholder reservation portion.

Defining the PMJJBY product in its DRHP, LIC elaborates that it is non-employer-employee groups’ group insurance to bank account holders who have opted through their bank for age group 18-50 at entry. It is a group policy, which are also non-participating and non-linked.

“...and hence non-individual policyholders are not eligible to participate under the policyholder reservation portion,” LIC says in its clarification.

LIC has reserved 10% of its offer size – 31,62,49,885 equity shares held by the central government – for its policyholders. Eligible policyholders can bid up to ₹2 lakh, net of any policyholder discount that may be offered in the IPO, through the ASBA and the UPI mechanism.

The allocation for the policyholder reservation portion and the discount for the same are yet to be announced. LIC had said in the DRHP that the discount will be announced at least two working days before the offer opens, after securing the necessary approvals.

Eligible policyholders have been advised to update their permanent account number (PAN) details in the policy records by February 28, 2022, that is two weeks from the date of the filing on DRHP, would not be considered an eligible policyholder, LIC has mentioned in the document.

Notably, Issue of Capital and Disclosure Requirements (ICDR) Regulations allow reservations in an IPO only for employees and shareholders, with no provisions for policyholders. It remains unclear as to how LIC proposed up to 10% reservation for policyholders in absence of any relevant provisions.

Meanwhile, the central government seems resolute on floating the IPO despite the headwinds on the back of geopolitical tensions in Ukraine that have kept the equity markets firmly in a bear grip for the past several sessions now.

“LIC IPO has been enthusiastically and eagerly awaited. We are on course and moving forward. I can see that now that the DRHP is out, there is a buzz and interest in the market. We will be going ahead with it,” finance minister Nirmala Sitharaman stated in a post-budget press conference in Mumbai.

On whether the listing will happen in the current fiscal on the back of the global equity rout dampening the sentiments, FM said DRHPs are not issued two years in advance.

The LIC IPO, which is touted to be the biggest public issue in the history of India, is crucial to completing the central government’s disinvestment target for the current fiscal. The issue is expected to open in the first half of March.