Ahead Of IPO, LIC Improves Asset Quality
Insurance behemoth LIC has enhanced its asset quality for the financial year ended March 2021, ahead of its proposed initial public offering (IPO). According to the current Annual Report of Life Insurance Corporation of India, non-performing assets (NPAs) were Rs 35,129.89 crore as of March 31, 2021, out of a total portfolio of Rs 4,51,303.30 crore (LIC).
There are Rs 254.37 crore in sub-standard assets, Rs 20,369.17 crore in dubious assets, and Rs 14,506.35 crore in loss assets. According to the IRDAI standards, an amount of Rs 34,934.97 crore is provided in the books of accounts for non-performing assets.At the end of March 2021, the gross NPA percentage was 7.78%, while the net NPA percentage was 0.05%. This is lower than the previous year’s gross NPA of 8.17 percent (as a percentage of its debt portfolio) and net NPA of 0.79 percent.
In absolute terms, NPAs totaled Rs 36,694.20 crore in 2019-20, out of a total debt of Rs 4,49,364.87 crore. Banks have a different stress threshold than insurers. LIC typically makes full provisions for all non performing assets in its debt portfolio.The company has put aside Rs 37,341.6 crore in provisions, of which Rs 34,934.97 crore is for dubious, sub-standard, and lost assets.
The annual report stated, “The management has assessed the asset quality and performance of investments in respect of real estate, loans, investments, other fixed assets, and suitable provision for impairment/diminution in value of investments/assets has been prepared for wherever applicable.”The government revised the Life Insurance Corporation Act of 1956 earlier this year to make the listing of LIC easier.
According to the legislation, the federal government will own 75% of the LIC for the first five years following its initial public offering (IPO), and then at least 51% at all times after that. LIC is currently owned entirely by the government. The LIC’s authorised share capital will be Rs 25,000 crore, divided into 2,500 crore shares of Rs 10 each. Policyholders will receive up to 10% of the proceeds from the LIC’s first public offering.
In her Budget speech, Finance Minister Nirmala Sitharaman stated that the LIC’s initial public offering (IPO) would take place this fiscal year.With a market capitalization of Rs 8-10 lakh crore, LIC has the potential to become one of the largest domestic corporations if it is listed.”We are moving with each of them…the intricacy demands a lot of time,” Sitharaman recently remarked of the LIC IPO and the strategic sale of BPCL.She went on to say that tying up loose ends across departments takes time and that it is being sped up.
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