'65 million PAN numbers have been linked to LIC policies', says M R Kumar

The investor interest has been quite good. It is especially good as far as the domestic investors are concerned: M R Kumar

State-owned insurance behemoth Life Insurance Corporation (LIC) is all set to get listed on the bourses, with the issue opening on May 4. The government is expected to mop up about Rs 21,000 crore from the listing. M R Kumar, chairperson, LIC, spoke with Subrata Panda on the sidelines of the announcement of their initial public offering (IPO) on business plans, investor interest, stake dilution in IDBI Bank, among other things. Edited excerpts:

How will your product mix change now that you want to sell more non-participatory (non-par) products?

We have not decided on a percentage. About 20-25 years back, we had a lot of non-par products. Slowly, we moved away from that. But we always have felt the need for such products. Also, it is easier to manage guaranteed products than paying out bonuses every year. Now, we have good non-par products in our portfolio. The interest rates have not fallen as much so we are able to guarantee good money. In the last six months, we have grown more than 100 per cent in the number of policies in the non-par segment. And, we will come out with more products.

The government wants to give up management control in IDBI Bank, as indicated by Tuhin Pandey during the IPO press conference, but you wanted to have some stake. How much do you want to hold in IDBI Bank?

Management control is 51 per cent. If you remember, we had 51 per cent and then it has come down to 49 per cent. I still continue to be the non-executive chairperson. What he (Tuhin Pandey, Dipam secretary) means by management control is we don’t need 51 per cent. I would like to have 15-20 per cent stake because going forward the bancassurance business has to grow and most of our banca business is through IDBI Bank. As far as stake sale is concerned, the government has started talking to potential investors. And, like the LIC IPO, IDBI stake sale is also quite big. One investor cannot step in and take it all, so they will have to look at a group and they are exploring the possibilities.

With LIC Housing and IDBI Bank both offering home loans, will it be an issue with the Reserve Bank of India (RBI), going forward?

The RBI has already flagged it. If the divestment in IDBI Bank happens, then this problem goes away. But, if it doesn’t happen, then maybe we will look at a structure wherein IDBI Bank will source loans for LIC Housing finance or some such arrangement. We are unable to decide now because we don’t know which is going to happen first.

Is there an estimate as to how much retail participation you will get for the IPO from the policyholders, who have linked their PAN?

We have seen 65 million PAN numbers linked to policies, but we don’t know how many of them have demat accounts. So, I can’t make any assumptions based on that, because we don’t have the data.
 

Your value of new business (VNB) margin was about 9 per cent in the September quarter but some private players have margins above 25 per cent. How do you plan to increase your margins and profitability?

That will come with the change in business mix we talked about. Private players also progressed from this kind of margin levels. However, we will not take that long to reach high-margin levels. We know what we need to do to reach 20 per cent margin levels. So, we will probably try to target a VNB margin of 20 per cent in a year’s time.

The new business premium market share has fallen slightly in FY22 over FY21. So, how do you plan to compete with private players?

I will compete with a growth story and market share is the outcome of that. So, if I can grow faster, my job is done. And, if we grow in certain segments like non-par, ULIPs, health, and protection, then my job is done.

Is it the right time to go for the IPO?

Had this question come six months back, I would have said let’s wait, because things were unfolding. Covid had still not receded and the war was starting. If you ask me today, the question I ask back is: how long should I wait? The work has been going on for two years because the finance minister announced it in the 2020 Budget. She again announced it in the 2021 Budget and we seriously started working as the previous year Covid happened and we could not do anything. If we waited longer, we would have to get the March financials into it and calculate the embedded value again, which would have taken some time. And, in the meantime, if the war got over and markets moved up then we would have lost the opportunity.

Can you elaborate on the investor feedback for the IPO?

The investor interest has been quite good. It is especially good as far as the domestic investors are concerned. Foreign institutional investors have concerns, but the long-only funds don’t mind because they know they are not parking money to take it out next year. So, they are going to put in money for the long haul.

Was the dilution reduced because of investor concerns?

There were concerns around the war and market conditions. But the market is settling now, so we thought it’s a good time for the IPO. But, it’s still not a good time for such a big issue. Had there been no war, maybe, we would come out with 7.5 per cent stake sale. At this point in time, 3.5 per cent stake sale looked good.

How will your investment decisions change post-listing?

If you take any listed banks, they also have their treasury and equity segments. The only difference is that we are a little large. I would sell my stock by saying that every share of LIC is more like an ETF, or balanced ETF. Most of our investments have done well. Many of them are good PSU dividend paying stocks. And, we have a buy-and-hold strategy and don’t churn as much.

Will some of the companies you have invested in pitch in for the IPO?

We believe there are some companies with good treasuries who will act as domestic investors.