Mumbai : Ahead of the launch of its mega IPO, Life Insurance Corporation of India (LIC) Chairman MR Kumar talked about investor demand for IPO; The insurer’s plan to retain a minority stake in IDBI Bank for its bancassurance network is why the agent network will continue to provide strong support for the company’s growth and concerns surrounding its valuation. Edited excerpt:
Looking at the market scenario, how is investor interest looking for IPOs, especially for foreign funds?
The investor interest, especially from the domestic investors side, is quite good. FIIs are concerned about the market, but long-only funds don’t mind. They are not investing money to sell it in a year or so. We have got good interest from such type of investors.
Do you think 21,000 crore public float will limit your inclusion in some of the key indices like MSCI and thus impact FII inflows into your stocks?
This is something for which we will have to wait and see. Talking about 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 call. We said we do it now and then see what happens. We may not be listed on MSCI; May be we are listed on Sensex or Nifty or 100 or 200. We’ll get listed somewhere, and then we’ll work upwards.
What is the stand on the sale of your stake in IDBI Bank? What is the timeline for stake sale?
About 15-20% is something we want. This business is growing very fast. Most of the bancassurance business is now through IDBI. They (government) have started talking to potential investors. Like LIC’s IPO, it is also quite big. No single investor can join in and have it all, so they have to look at a group. They are looking for possibilities.
What is your strategy for your product portfolio? You mentioned that you want to grow your non-participating business?
The fact is that 20-25 years ago we initially had a lot of non-participating products (in which the policyholders did not participate in the profits of the life insurer). Slowly we moved on, like other ULIPs were going etc., so we also left. But we always felt the need for it (non-participating products). It is easier to manage guaranteed products than to pay bonuses every year. That being the case, we moved along as the industry progressed, and customer preferences were changing. But now, in non-participating, we have good products. We have increased the number of policies by over 100% in the last six months. We continue to develop rapidly, and we will bring more products to this field.
With increasing digitization, do you want to reduce your dependency on your agent network?
Agency has been a strong channel for us. This is a channel that will continue to be with us. Some of the investors we met, especially foreign investors, are very excited about the agency channel as it is a very stable channel. And over time, if you look at the stickiness of our agents, there are people who have been there for 15-20-25 years. That stickiness helps in a number of ways. They care about perseverance. That is why our tenacity in the 61st month is far better than our tenacity in the 13th month.
Are investors concerned about LIC’s growth and profitability prospects vis–vis private peers, and was this included in the valuation of the IPO?
A mature organization like LIC had not done embedded valuation at all for decades. Let’s say they did it 25 years ago. What would be the multiplier in terms of market sentiment? It will probably be ahead of the private players. Since we’ve done this for the first time, it sounds like your multiplier is low. It is no less. It has already reached a certain level, and going forward it will increase. And that’s what we told investors, and they understand it. And they also understand that 6-8 years ago even new listings for private companies were initially at the same level.